According to a report by the Bank of Baroda, India's retail inflation is expected to broadly align with the Reserve Bank of India’s (RBI) projection of 4.5% in the first quarter of FY26. The assessment reflects a cautious optimism rooted in moderating core inflation and favorable base effects.

The report highlights that while food prices remain volatile, especially with concerns over vegetables and pulses, the overall inflation trend is likely to remain within manageable levels. Non-food inflation has shown signs of easing, driven by stable fuel prices and a cooling in global commodity costs.

The RBI, in its latest monetary policy statement, retained its inflation forecast for FY26, signaling a wait-and-watch approach amid global uncertainties. The Bank of Baroda analysis complements this view, emphasizing that despite weather-related risks to food inflation, broader economic indicators suggest price stability in the near term.

This projection is crucial as it may influence the central bank’s future interest rate decisions and impact consumer sentiment, business investment, and overall economic recovery.