RBI Warns of Broadening Price Pressures, Revises CPI Forecast Upward to 5.2%
What Happened
The Reserve Bank of India has raised its FY27 retail inflation (CPI) forecast to 5.2% from 5.0%, citing a deficient monsoon, El Niño conditions, supply-side pressures, and volatile global oil prices. The central bank said inflation is no longer as benign as last year, with food and core inflation showing signs of broadening. The RBI now projects inflation at 4.9% in Q2 FY27, 6.0% in Q3, 5.7% in Q4, and 5.6% in Q1 FY28. Retail inflation rose to 4.82% in August, a 22-month high.
Key Takeaways
The higher inflation outlook was a key factor behind the RBI's decision to raise the repo rate by 25 basis points to 5.50% and shift its policy stance to "calibrated tightening", signaling a stronger focus on containing inflation risks.