India's CPI inflation may remain at 2.2% in FY26, below RBI's forecast of 2.6%: SBI Research

Core Insights - India's Consumer Price Index (CPI) inflation for FY26 is projected to be 2.2%, significantly lower than the Reserve Bank of India's (RBI) forecast of 2.6% [7] - CPI inflation reached a 99-month low of 1.54% in September 2025, primarily due to a decline in food and beverage prices [7] - The decline in inflation since October 2024 has been largely driven by the food group, which shifted from a positive to a negative contribution [2][7] Inflation Trends - Although food prices saw a modest seasonal increase since May, favorable base effects have kept year-on-year inflation on a declining path [4][7] - The core CPI, excluding gold, is currently at 3.28% [5][7] - Inflation is expected to drop to around 0.45% next month, suggesting a need for decisive policy action [6][7] Future Projections - Inflation for FY27 is projected to remain lower at 3.7%, indicating ongoing stability in price levels [7] - The RBI risks missing its inflation target if it continues to focus on market fluctuations rather than the evident deceleration in inflation [5][7] - SBI recommends that the RBI should consider rate cuts to avoid falling behind in policy adjustments, especially amid market uncertainties [6][7]