Lowered anticipated retail inflation in Q1 of FY2026 (April-June) according to BoB's report falls short of RBI's projection.

Lowered anticipated retail inflation in Q1 of FY2026 (April-June) according to BoB's report falls short of RBI's projection.

In a recent report, Bank of Baroda (bob) predicts that India's retail inflation for the first quarter of FY26 will take a dip, undercutting the Reserve Bank of India's (RBI) forecast of 2.9%.

The insights from high-frequency price data for June 2025 offer encouraging signs of stability in prices. The report conjectures that the CPI for Q1 will fall short of the RBI's target, attributing this to the comforting high-frequency price data.

However, the report sounds a warning bell, urging careful monitoring of inflation trends, particularly with regard to Tomato, Onion, and Potato (TOP) prices. Although a buildup in these food items has been observed, the increase has been gradual.

A notable relief in inflation during May 2025 can be ascribed to the food category. Prices of vegetables, pulses, cereals, and protein-based food items have significantly moderated, contributing to a less inflated atmosphere.

The ease in food inflation is accredited to improved supply dynamics and the government's proactive supply management policies.

While food inflation appears to be under control, the report points out that core inflation might exhibit a tendency to stick around. This could be due to a surge in demand, bolstered by the RBI's jumbo rate cut and the system's ample liquidity.

Looking ahead, some adhesiveness in core inflation might be witnessed, mainly due to an increase in government expenditure, improved rural demand, the rise in Minimum Support Prices (MSP), and consistent food prices.

On the global stage, the report acknowledges some volatility in commodity prices, particularly crude oil, due to ongoing geopolitical tensions. However, a massive price surge is unlikely as global demand remains weak, as indicated by high-frequency data from major economies.

The report suggestively concludes that the inflation outlook for the year remains favorable, provided the monsoon progresses well. Additionally, clarity on global tariff policies, especially the upcoming July 2025 deadline, will offer more direction on the inflation trajectory.

So, it seems we're sailing through waters that are less inflation-laden than previously anticipated, buoyed by a respite in food prices, supportive economic tendencies, and proactive monetary policy adjustments. (ANI)

For a deeper understanding, consider subscribing to The Tribune Premium. Get access to thought-provoking opinions, expert analysis, in-depth insights, and additional member benefits.

Already a Member? Sign In Now

Curious Facts:

Those eager for a bite of the interesting side of the story may find it intriguing that the Bank of Baroda's Essential Commodities Index (ECI) fell by 0.6% year-on-year in May 2025. This marks the first decline in the ECI since January 2019, adding another layer of evidence supporting the trend of easing inflation. Additionally, the RBI has revised its inflation projection downward, reflecting confidence in the current macroeconomic environment and the diminishing inflationary pressures.

Recommended Reads:

• "Farmers' Protests and the Future of Agriculture in India"
• "India's Economic Recovery Driven by Favorable Monsoon Expectations"
• "The Impact of RBI's Rate Cut on India's Banking Sector"

1. In the realm of finance and business, the Bank of Baroda's revised inflation projection reflects a positive opinion on the current macroeconomic environment, with diminishing inflationary pressures.
2. As for the news, the RBI's Essential Commodities Index (ECI) showed a 0.6% year-on-year decline in May 2025, a fact that adds evidence to the trend of easing inflation in India's food sector.

Read also: