Consumer inflation in Q4FY26 likely at 2.6% below RBI forecast, 25 bps rate cut possible in Feb or April: Report

New Delhi [India], January 13 : Consumer inflation for the fourth quarter of the current financial year FY26 is expected to remain at 2.6 per cent, which is below the Reserve Bank of India's (RBI) projection of 2.9 per cent, as highlighted in a report by Union Bank of India.

The report also maintained its view that there is a possibility of a final 25 basis points rate cut in February or April 2026, which could take the repo rate to 5.0 per cent.

It stated "Our CPI projection for Q4FY26 is tracking at 2.6 per cent, lower than RBI's projection of 2.9 per cent...... We hold on to our view of the possibility of a final 25 bps rate cut in February or April 2026".

According to the report, Consumer Price Index (CPI) projection for Q4FY26 is tracking lower than the central bank's estimate. Looking ahead to FY27, while the Monetary Policy Committee (MPC) has projected CPI inflation of 3.9 per cent in Q1 and 4.0 per cent in Q2, the bank's estimates are slightly lower at 3.4 per cent and 3.6 per cent, respectively.

The report noted that risks to the CPI outlook continue to be closely monitored. These include movements in global commodity prices, particularly metals, domestic food price dynamics and weather-related uncertainties.

Despite these risks, the bank reiterated its expectation of a possible final 25 bps rate cut, while acknowledging that the timing of the last rate cut is usually difficult to predict.

On recent inflation trends, the report stated that CPI inflation in December 2025 continued to firm, printing at 1.33 per cent compared with 0.71 per cent in November. While the inflation rate crossed the 1 per cent mark, it remained below 2 per cent for the fourth consecutive month.

The December print was significantly lower than the bank's estimate of 1.66 per cent, while the consensus stood at 1.50 per cent.

Going forward, the report said the January 2026 CPI print is tracking at around 2.3 per cent, adding that the change in the base year and its impact on CPI inflation dynamics will be closely watched.

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