RBI MPC Lowers FY26 CPI Inflation Forecast To 2%, GDP Growth Projection Raised To 7.3%

The Reserve Bank of India’s Monetary Policy Committee (MPC) unanimously voted to reduce repo rate by 25 bps and have decided to continue with a ‘neutral’ stance.

The RBI also raised FY26 GDP growth estimates to 7.3% from 6.8% earlier. It reduced FY26 CPI inflation forecast to 2% from 2.6% earlier.

The central bank has been tasked by the government to ensure that CPI- based retail inflation remains at 4 per cent with a margin of 2 per cent on either side.

RBI Governor Sanjay Malhotra said that core inflation (CPI headline excluding food and fuel) remained mostly stable in September and October, despite ongoing price pressures from precious metals. Excluding gold, core inflation decreased to 2.6% in October. In general, the reduction in inflation has become more widespread.

India's retail inflation dropped to a historic low of 0.25 per cent in October 2025, marking the lowest level since the Consumer Price Index (CPI) series was introduced. Besides, the Indian economy has clocked better-than-expected GDP growth of 8.2 per cent in the second quarter.

The retail inflation is trending below 4 per cent since February this year. It eased to historic low in October, aided by an easing of food prices and favourable base effect.

RBI on Friday cut interest rate by 25 basis points to 5.25 per cent in a bid to further bolster economic growth, which rose to a six-quarter high of 8.2 per cent in the second quarter of the current financial year.

The rate cut comes on the back of the consumer price index (CPI) based headline retail inflation ruling below the 2 per cent lower band mandated by the government for the last three months.