Inflation likely to be much lower than RBI projections in FY26 and FY27: SBI Report

Inflation Projections - The Reserve Bank of India (RBI) has revised downwards its FY26 Consumer Price Index (CPI) inflation projection by 50 basis points to 2.6%, which is a significant 160 basis point cut from earlier projections made in April [2][3] - The report suggests that actual inflation for both FY26 and FY27 could be much lower than the RBI's revised estimates due to favorable domestic conditions [2][3] Economic Growth Estimates - The RBI has also increased its estimate for real GDP growth for FY26 to 6.8% [3] - For FY27, the inflation projection is set at 4.5% [3] Monetary Policy Insights - The Monetary Policy Committee (MPC) has decided to maintain the policy rate unchanged, which is seen as a logical move given the current global economic uncertainties [4] - The report emphasizes the importance of monetary policy communication in shaping expectations and maintaining clarity in forward guidance [4] Future Rate Cuts - The report indicates that the RBI may be open to future rate cuts due to low inflation forecasts and recent downward adjustments in growth estimates, although the timing of such cuts remains uncertain [5] Domestic Financial System - The MPC's decision reflects a dynamic approach that goes beyond traditional monetary policy, supported by comfortable liquidity conditions and a stable external sector despite trade uncertainties [6] - The domestic financial system is expected to benefit from forward-looking reforms aimed at enhancing India's global positioning and reinforcing its resilient economic ecosystem [6]