Retail inflation slips below RBI's target range in September to 1.54%

India’s retail inflation eased below the lower end of the Reserve Bank of India's 2-6% target range to 1.54% in September from 2.07% in August, driven by persistent cooling in food prices.

A Reuters poll of 38 economists had forecast retail inflation in September to ease to 1.70%.

Food prices have dropped sharply in recent months from last year's high levels driven by a sustained slide in vegetable costs, which have fallen by double digits since April.

Price pressures have stayed below the Reserve Bank of India’s medium-term target of 4% for seven straight months.


While economists had expected the base effects that largely helped keep a lid on inflation this year to fade in August, the official data showed food prices remained constrained compared with a year earlier - a trend that was likely sustained in September.

RBI’s inflation outlook
RBI during its Monetary Policy Committee meeting earlier this month signalled that a benign inflation backdrop provided scope for further policy easing to support growth, even as it held rates steady as expected.

The central bank said inflation has eased and is likely to moderate further in FY26, supported by GST rate cuts, a favourable outlook on food prices and improved supply prospects. However, it cautioned that geopolitical tensions and tariff-related trade disruptions could weigh on the outlook.

For the full year FY26, the RBI has projected headline inflation at 2.6%, significantly lower than the 3.1% forecast made in August. Quarter-wise estimates are: 1.8% in Q2, 1.8% in Q3, Q4 at 4% and Q1 FY27 at 4.5%. The central bank maintained that risks to the outlook are “evenly balanced.”

The RBI also noted that Core inflation has remained largely contained at 4.2% in August.

Governor Sanjay Malhotra said, "The MPC observed that the overall inflation outlook has turned even more benign in the last few months due to a sharp decline in food prices and the rationalisation of GST rates."