Q4FY26 inflation to be 3%, lower than RBI's 3.2% view: UBI report

A Union Bank of India report projects Q4FY26 consumer inflation at 3%, slightly below the RBI's 3.2% forecast. While February 2026 inflation rose to an 11-month high of 3.21%, it remains within the central bank's comfort range.

Q4FY26 Inflation Projection

The consumer inflation for the fourth quarter of the current financial year FY26, is expected to come in at 3 per cent, slightly lower than the Reserve Bank of India's (RBI) projection of 3.2 per cent, according to a report by Union Bank of India.

The report noted that the bank's internal projections suggest inflation will remain lower than the central bank's estimates in the coming quarters as well. "Our CPI projection for Q4FY26 is now tracking 3 per cent, slightly lower than RBI's projection of 3.2 per cent," the report said.

Factors Influencing Projections

However, the report added that the Monetary Policy Committee (MPC) is expected to revise its inflation outlook in the upcoming April policy meeting. The revision in projections follows the Ministry of Statistics and Programme Implementation's (MoSPI) decision to change the base year used for inflation calculation. The ministry has officially shifted the base year for the Consumer Price Index (CPI) from 2012 to 2024.

February Inflation Data

Meanwhile, the latest inflation data shows that CPI inflation in February 2026 rose compared to the previous month. According to the report, Consumer Price Index (CPI) inflation in February 2026 accelerated the upward trend and printed at 3.21 per cent compared with 2.74 per cent in January. Although the headline inflation touched an 11-month high, it remained well within the central bank's comfort range.

Food Inflation Analysis

Food inflation also saw a noticeable increase during the month. The report noted that food inflation stood at 3.35 per cent in February, which was higher than the bank's projection of 2.55 per cent. Food inflation also rose sharply during the month, increasing by 123 basis points.

The report said the rise came as a surprise because vegetable prices actually declined significantly during the period. "This was a surprise element as the veggies were actually down during the month by more than 14% MoM," the report added.

Future Outlook

Looking ahead, the report expects food inflation to remain largely muted in FY26, supported by a high base effect. However, it cautioned that inflation in March could see some upward pressure. "We expect food inflation to remain largely muted in FY26, supported by a high base even though March can see the print on higher side as the summer heat kicks in amidst supply side apprehensions in an era of war and uncertainties," the report said. (ANI)

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