Inflation to stay benign, say minutes of RBI MPC, as food prices ease and crude cools off

The MPC now projects CPI inflation for 2025-26 to average 4 percent with quarterly readings in the range of 3.6 and 4.4 percent.

The retail inflation is expected to remain well within the Reserve Bank of India’s (RBI) targetted range over the coming year, with food prices easing sharply and global crude oil rates softening, minutes from the Monetary Policy Committee’s (MPC) April meeting released on April 23 said.

The CPI inflation fell to 3.6 percent in February from 5.2 percent in December 2024, largely due to a seasonal correction in vegetable prices and continued deflation in fuel prices.

The MPC now projects CPI inflation for 2025-26 to average 4 percent with quarterly readings in the range of 3.6 and 4.4 percent.

Deputy Governor M Rajeshwar Rao called the current inflationary trend ‘benign’, citing data to show food prices are continuing to fall in April as well. He also pointed at the sharp decline in headline CPI for February as an encouraging sign.

“Significant softening of headline inflation and greater confidence of a benign outlook, especially on food prices, signals a likely durable alignment of inflation with the target rate,” Rao said.

Rajiv Ranjan, Executive Director at the RBI echoed this view and said, “Considerable progress achieved on the disinflation front has offered latitude to monetary policy to be growth supportive.”

Ranjan added that household and business expectations had moderated from both three-month and one-year horizons, strengthening confidence in price stability.

External factors, too, are playing a role, according to the MPC minutes.

Saugata Bhattacharya, economist and MPC member, pointed towards lower industrial metals and crude oil prices, and cited the International Energy Agency’s (IEA) forecast that said global oil supply may exceed demand in 2025.

“Softer crude prices, even after factoring in higher excise duties and LPG price hikes, will help to further moderate CPI inflation,” Saugata Bhattacharya said.

He also said that the dumping of cheaper goods into India due to global trade distortions could, while hurting domestic industry, put downward pressure on input costs.

Professor Ram Singh, another member of the MPC, struck a similarly confident tone, and said that the CPI is expected to stay comfortably within the RBI’s target range.