RBI factored in rupee’s current level while making CPI inflation projections, says Governor Sanjay Malhotra

CPI Inflation

The Reserve Bank of India (RBI) Governor Sanjay Malhotra on December 5 said the central bank has taken consideration of Indian rupee’s current level while making the projections for Consumer Price Index (CPI) inflation for the current financial year.

“We have factored in the current levels of rupee while making projection of CPI inflation for FY26,” Malhotra said during the post-monetary policy press conference.

The central bank revised down the CPI inflation by 60 basis points (Bps) for FY26 to 2 percent from 2.6 percent projected earlier.

The Q3 inflation projection was at 0.6 percent as compared to 1.8 percent earlier, and Q4 projected at 2.9 percent as compared to 4 percent earlier, and retail inflation for Q1 of the next fiscal is seen at 3.9 percent as compared to 4.5 percent projected earlier, and RBI projects Jul-Sept FY27 CPI inflation at 4 percent.

"Headline CPI inflation declined to an all time low in October 2025. The faster-than-anticipated decline in inflation was led by correction in food prices, contrary to the usual trend witnessed during the months of September-October. Core inflation (CPI headline excluding food and fuel) remained largely contained in September-October, despite continued price pressures exerted by precious metals. Excluding gold, core inflation moderated to 2.6 percent in October. Overall, the decline in inflation has become more generalised," said Malhotra.

On December 5, the central bank cut repo rate after keeping rates unchanged for two times in a row to 5.25 percent from 5.5 percent earlier.

The MPC kept the stance unchanged at 'Neutral'. The decisions were taken unanimously by the six-member rate-setting panel.

As a result, the standing deposit facility (SDF) rate remains changed to 5 percent and the marginal standing facility (MSF) rate and the Bank Rate at 5.5 percent.

A poll by Moneycontrol of 20 economists, bankers, and fund managers showed that the RBI’s MPC will cut repo rate by 25 basis points (bps) due to comfort provided by the lowest ever Consumer Price Index (CPI) Inflation in the last two months.