Mumbai: RBI Friday cut inflation projections for the current fiscal to 3.7 per cent from the earlier estimate of 4 per cent, as it expects core inflation to remain benign with the easing of international commodity prices.

The sub-4 per cent average retail inflation projection is the lowest in recent years.

The RBI, which cut key policy rate by 50 basis points to 5.5 per cent, said that despite these favourable prognoses, it would remain watchful of weather- uncertainties and still evolving tariff- concerns with their attendant impact on global commodity prices.

The RBI, in its monetary policy announcement in April, had projected retail inflation to average 4 per cent in FY26.

In its policy Friday, RBI Governor Sanjay Malhotra said assuming a normal monsoon, consumer price index (CPI) inflation for the financial year 2025-26 is now projected at 3.7 per cent, with June and September quarters at 2.9 per cent and 3.4 per cent, respectively. Inflation is projected at 3.9 per cent for the December quarter and 4.4 per cent for the March quarter.

The retail inflation in April moderated to a near 6-year low of 3.16 per cent.

The RBI said the outlook for inflation points towards benign prices across major constituents.

The record wheat production and higher production of key pulses in the Rabi crop season should ensure an adequate supply of key food items. Going forward, the likely above normal monsoon along with its early onset augurs well for Kharif crop prospects.

“Reflecting this, inflation expectations are showing a moderating trend, more so for the rural households. Most projections point towards continued moderation in the prices of key commodities, including crude oil,” Malhotra said.

The RBI has been mandated to keep inflation at 4 per cent with a band of (+/- 2 per cent). The retail inflation remained below the 4 per cent limit for three months in a row till April 2025.

PTI