Reserve Bank of India (RBI) Governor Sanjay Malhotra on Friday said that CPI inflation projections for the first two quarters of 2026–27 have been revised marginally upwards, citing higher precious metal prices as the primary driver of the change. Inflation is now projected at 4.0% in Q1 and 4.2% in Q2 of 2026–27, with precious metals contributing around 60–70 basis points to the upward revision.

Underlying inflationary pressures remain muted

Despite the increase, Malhotra stressed that underlying inflationary pressures remain muted, suggesting that the broader price environment continues to stay under control. “Excluding precious metals, core inflation pressures remain subdued, and risks are evenly balanced,” he said while outlining the RBI’s inflation assessment. 

Headline CPI inflation remained low in November and December, even though it firmed up by about one percentage point over the two months. The rise was largely driven by a lower rate of deflation in the food group. Excluding gold, core inflation remained stable at 2.6% in December, reinforcing the RBI’s view that price pressures outside select segments remain benign. 

Near-term inflation momentum

The Governor noted that while near-term inflation momentum is expected to remain muted, unfavourable base effects — stemming from a sharp decline in prices during the fourth quarter of 2024–25 — could lead to an uptick in year-on-year inflation in Q4 of 2025–26. Taking these factors into account, CPI inflation for 2025–26 is now projected at 2.1%, with Q4 inflation seen at 3.2%. 

For the financial markets, concerns around metals prices were reflected in equity movements. At 11.58 AM on Friday, the Nifty Metal index was trading 0.3% lower at 11,882.30 points. 

Industry bodies broadly welcomed the RBI’s inflation outlook. Rajeev Juneja, President of the PHD Chamber of Commerce and Industry (PHDCCI), said the central bank’s assessment that headline CPI inflation remains benign provides comfort to both consumers and producers. “Moderation in food prices, stable core inflation, and adequate buffer stocks are positive for price stability and GDP growth,” he said. 

Need for continued vigilance: Juneja

At the same time, Juneja cautioned that the RBI’s acknowledgment of upside risks from geopolitical tensions, commodity price volatility, and precious metal prices underscores the need for continued vigilance. He added that a stable interest rate environment, benign inflation expectations, healthy corporate and financial sector balance sheets, and the government’s sustained focus on capital expenditure are likely to support private investment and strengthen medium-term growth prospects.