New Delhi [India], February 13 : The revision in the Consumer Price Index (CPI) base year has had a limited impact on monetary policy interpretation, and the Reserve Bank of India (RBI) is expected to maintain the status quo on interest rates in the coming quarters, according to a report by Union Bank of India.
The report stated, "India: Jan'26 headline CPI rises to 2.75 per cent as expected on base revision while core CPI dip to 3.46 per cent provides solace; we maintain MPC view of status quo on rates."
It noted that the base revision has limited impact on near-term policy interpretation, as the MPC may choose to closely watch for trends in the coming trends with a deeper focus on inflation momentum and not just YoY levels.
The report added, "We maintain our view of status quo on rates in the coming quarters (as signalled by RBI Governor in Feb'26 MPC) and liquidity will remain the key policy focus area."
As per the new base year 2023-24, CPI inflation in January 2026 rose to 2.75 per cent, compared with 1.33 per cent in December under the old base year 2011-12.
The Core CPI slipped to 3.46 per cent, a significant positive surprise against the estimate of 4.73 per cent under the old base. This was mainly due to a fall in the weight of gold CPI to 0.62 per cent from 1.1 per cent.
Core inflation excluding gold inched up to 2.91 per cent, showing that "underlying inflation trends remain weak." Meanwhile, food CPI moved back into the inflation zone at 2.11 per cent.
The report said the new base data is more comprehensive, with the weight of food reduced to around 40 per cent from around 46 per cent, and expanded coverage of markets, towns, goods and services.
It added that since sub-group data under the new series is available only from January 2025, inflation momentum trends will be crucial for policy assessment.
Overall, the report maintained that despite the base revision, the Monetary Policy Committee (MPC) is likely to focus on inflation momentum and liquidity, and keep rates unchanged in the coming quarters.
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