RBI projects CPI inflation at 5.2% for FY27, highlights rise in core inflation

Reserve Bank of India noted in its latest Monetary Policy Statement today that CPI inflation increased to 4.8 per cent in August 2026 from 4.5 per cent in July. While the increase has been predominantly on account of higher inflation in food and fuel groups, core inflation has also picked up indicating some signs of widening price pressures. Food price increases have become more broad based along with notable spikes in certain items such as sugar and onion. The uptick in fuel inflation in August largely reflected unfavourable base effects. Core inflation increased to 4.2 per cent and core inflation, excluding precious metals, increased to 2.9 per cent in August. The weighted share of items in headline CPI recording inflation above 4 per cent increased steadily to about 37 per cent in August. The near-term outlook on inflation points towards continued pressures from supply side on account of the deficient monsoon, ongoing El Ni?o conditions and high energy and other commodity prices, the pass through of which is still continuing. Considering all factors, CPI inflation is projected to be 5.2 per cent for 2026-27 with Q2 at 4.9 per cent; Q3 at 6.0 per cent; and Q4 at 5.7 per cent. Inflation for Q1:2027-28 is projected at 5.6 per cent with risks being evenly balanced. Core inflation is projected at 4.4 per cent for 2026-27. In the light of available data, it is clear that inflation and its outlook are not benign as they were last year with headline CPI inflation expected to average almost 5.8 per cent in the next three quarters and core inflation projected at 4.4 per cent this year.

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