Introducing a core inflation forecast is not a policy shift, says RBI Guv

RBI MPC meet: RBI Governor Sanjay Malhotra clarified that publishing a core inflation forecast is not a change in policy approach and the central bank will continue to focus on headline inflation

Reserve Bank of India (RBI) Governor Sanjay Malhotra on Wednesday said the decision to introduce a core inflation forecast should not be seen as a change in the way monetary policy is conducted.

 

Speaking at the post-monetary policy press conference, RBI Governor Sanjay Malhotra said the move was largely in response to requests from market participants seeking more detailed guidance on inflation trends.

 

"Having a core inflation forecast has been a request from market participants, but it should not be seen as a shift in monetary policy making,” he said.

 

He added that headline Consumer Price Index (CPI) inflation will remain the main factor guiding the RBI’s monetary policy decisions.

 

 

Introduced after new inflation framework

 

Malhotra said the timing of introducing the core inflation forecast was appropriate as it comes after the rollout of the new flexible inflation targeting (FIT) framework.

 

Core inflation excludes volatile components such as food and fuel, and is often used by policymakers to understand the broader trend in prices.   

 

Headline inflation remains key focus

 

Despite introducing the new forecast, Malhotra stressed that the RBI’s primary objective remains keeping headline inflation aligned with the 4 per cent target under the inflation-targeting framework.

 

“Our target is to ensure that headline inflation remains in line with the goal of 4 per cent,” he said.

 

The governor also clarified that the central bank does not rely on a single measure of inflation when deciding policy rates. “We will continue to look at all CPI components before taking a decision on the repo rate,” he said.

 

Repo rate could move either way

 

Malhotra said that while India’s real GDP growth remains strong, uncertainties in the global environment prompted the Monetary Policy Committee (MPC) to pause for now.

 

"We have a neutral stance, but the repo rate can move in either direction. It's possible that low rates continue for a long time," he said.

 

RBI MPC April: Repo rate unchanged

 

The RBI’s Monetary Policy Committee on Wednesday kept the repo rate unchanged at 5.25 per cent in its first policy review for the financial year 2026-27 (FY27).

 

The committee also retained the ‘neutral’ stance. The standing deposit facility (SDF) rate was kept at 5 per cent, while the marginal standing facility (MSF) rate and the bank rate were maintained at 5.5 per cent.

 

Malhotra said India’s real GDP growth for FY27 is projected at 6.9 per cent.

 

“Global growth faces increasing downside risks as the sharp rise in energy prices and shortages of inputs have stoked inflation fears,” the RBI Governor said.

 

The RBI has projected CPI inflation for FY27 at 4.6 per cent.