Skip to main content

RBI MPC October policy: Central bank cuts FY26 inflation estimate to 2.6%

By

 The Reserve Bank of India (RBI) has lowered its inflation forecast for 2025-26 to 2.6 per cent, down from the previous estimate of 3.1 per cent. Quarterly projections are as follows: Q2FY26 and Q3FY26 at 1.8 per cent, and Q4FY26 at 4 per cent. Consumer Price Index (CPI) inflation for Q1 of 2026-27 is projected at 4.5 per cent.“The risks are evenly balanced,” RBI Governor Sanjay Malhotra said.

The MPC noted that the inflation outlook has become more favourable in recent months, mainly due to a sharp drop in food prices and the rationalisation of GST rates. The decline in overall inflation is largely driven by lower food inflation, supported by better supply conditions and government measures to manage the supply chain efficiently. The recent GST rate adjustments are expected to bring down the prices of several items in the CPI basket. As a result, overall inflation is likely to be softer than the August projection, mainly because of the GST cuts and lower food prices.Malhotra said, “Ongoing tariff and trade policy uncertainties will impact external demand, prolonged geopolitical tensions and volatility in international financial markets, caused by the risk of sentiments of investors, pose downside risks to the growth outlook. The implementation of several growth-inducing structural reforms, many of which were announced by the Prime Minister on August 15, including the streamlining of GST, is expected to offset some of the adverse effects of the external headwinds.”

Quarterly CPI estimates (FY26-FY27)

• Q2FY26: 1.8 per cent (from 2.1 per cent)

• Q3FY26: 1.8 per cent (from 3.1 per cent)

• Q4FY26: 4.0 per cent (from 4.4 per cent)

• Q1FY27: 4.5 per cent (from 4.9 per cent)

 The Monetary Policy Committee (MPC) unanimously decided to keep the repo rate at 5.5 per cent and maintain a neutral stance.

 

Other rates remain unchanged:

• Standing Deposit Facility (SDF): 5.25 per cent

• Marginal Standing Facility (MSF) & bank rate: 5.75 per cent

 

GDP growth forecast revised upwards

Taking current factors into account, the RBI revised real GDP growth for the year to 6.8 per cent, up from the earlier 6.5 per cent. Quarterly projections are: Q2: 7 per cent, Q3: 6.4 per cent, Q4: 6.2 per cent, while Q1 of 2026-27 is expected at 6.4 per cent. The MPC’s next meeting is scheduled for December 3-5, 2025.

 

-Business Standard 01st October,2025

Comments

Post a Comment

Popular posts from this blog

Govt’s gamble on GST cuts: What do the bond and currency markets signal?

By
  It’s not just humans who suffer from cognitive biases; markets do too. Interestingly, different financial markets exhibit distinct biases, each interpreting events through its own prism of prejudice. Take the recent announcements on GST reforms: equity markets have chosen to view them through the lens of growth, while bond and currency markets are focusing on potential macroeconomic risks—fiscal pressures and current account challenges. So, which lens captures the true pulse?Equity markets may be right in expecting GST reforms to revive consumption, which has remained lacklustre for a while. But the key question remains—will this revival come at the cost of broader macro stability?It is well known that consumption stocks have rallied since the GST rationalisation announcement. But what about bond markets? What signals are they sending since this rejig was announced from the ramparts of the Red Fort?The signs aren't encouraging. Bond prices have slumped and yields have surged sinc...
Post a Comment
Read more

Luxury carmakers urge clarity on GST rates to boost festive season sales

By
  A clear picture regarding new GST rates at the earliest will help the overall auto industry, including the luxury car segment, to regain momentum in the ongoing quarter, which generally sees enhanced sales on account of the festive season.The high-powered GST Council, chaired by Finance Minister Nirmala Sitharaman, will meet on September 3-4 to discuss moving to a two-slab taxation.In an interaction with PTI, BMW Group India President and CEO Hardeep Singh Brar said the recent speculation about the change in GST rates has caused uncertainty in the minds of consumers.Consumer interest and demand is strong, but they (prospective buyers) have adopted a wait-and-watch approach, and this delayed decision-making is impacting new vehicle sales at a certain level, he noted."Expediting clarity on GST rates is essential to get back to speed and ensure the auto sector's contribution to economic growth during this quarter is robust," Brar stated.He also hoped that the sustainable p...
Post a Comment
Read more

Sebi proposes tighter norms for green bond third-party reviewers

By
  Sebi on Friday said it has proposed to tighten the norms to appoint independent third-party reviewers or certifiers for green debt securities to align them with requirements for other ESG-linked bonds.In a draft circular, Sebi said that the current norms for green bonds, introduced in February 2023, lack detailed requirements around reviewer independence, conflict of interest mitigation, and disclosure standards that are now in place for other ESG-linked securities under a June 2025 circular.The regulator's latest proposal seeks public comments on a revised framework that would bring parity by incorporating comprehensive criteria for third-party certifiers of green bonds on non-convertible securities.Under the proposed norms, issuers of green debt securities will need to appoint reviewers who are independent of their management, directors, and key managerial personnel. These reviewers will be remunerated in a way that prevents any conflicts of interest and possess relevant expert...
Post a Comment
Read more