Another Rate Cut On The Cards? FinMin Estimates FY26 Inflation To Undershoot RBI's 3.7% Forecast
Retail inflation in FY26 might be below RBI's 3.7% forecast, says Finance Ministry's June review.
The Finance Ministry, in its June economic review, has estimated that the Consumer Price Index (CPI), also known as retail inflation, may stay below the RBI's projection of 3.7 per cent, further opening up a wide space for the continuation of the RBI's rate-easing cycle.
'It appears likely that the full fiscal year inflation rate would undershoot the central bank's expectation of 3.7%," the ministry noted, adding that this could support a continuation of the RBI's rate easing cycle. 'Core inflation remains subdued, and overall inflation is comfortably below the RBI's 4% target, affording room for the easing cycle to be sustained," the report stated.
The ministry also highlighted that the RBI has projected headline inflation at 3.4% for the second quarter of FY26, while actual inflation in Q1 came in below the internal target.
Retail inflation or Consumer Price Index (CPI) inflation for the month of June 2025 has hit an over 6-year low of 2.10%, according to latest data released by the government. This marks the lowest year-on-year inflation since January 2019. Inflation in May 2025 stood at 2.82%.
Food inflation experienced a substantial decrease of 205 basis points in June 2025 compared to May 2025, reaching its lowest level since January 2019.
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