Feeling the pinch a little less at the grocery store? You’re not alone. With food prices slipping below usual seasonal trends, retail inflation is cooling, and fast. Union Bank of India has taken note, revising its FY26 headline inflation forecast down from 4% to 3.6%. That’s not just a minor adjustment — it closely mirrors the RBI’s updated projection of 3.7% for the same period. Lower food costs mean more breathing room for households, and these numbers suggest the trend may hold. If this continues, your kitchen budget might finally get that long-overdue break. Let’s hope the skies stay kind.
What Does The Report From Bank Quote?
The bank, in its latest report dated July 11, anticipates June 2025’s retail inflation to drop sharply to 2.3%. It stated, “The worst seems to be over for now,” suggesting that July figures may represent the near-term bottom. In its scenarios, Union Bank forecasts FY26 Consumer Price Index (CPI) inflation at 3.1% under an optimistic outlook and 4.2% in a pessimistic one — both of which are below FY25’s estimated level by at least 40 basis points.
The report emphasizes that maintaining sub-4% inflation depends significantly on a decline in sticky food inflation. After remaining persistently high in the 6.5%–7.0% range from 2022 to 2025, food inflation is projected to fall to 3% in FY26 — the lowest in seven years. However, this forecast hinges on favorable weather conditions supporting crop yields and food supply chains.
Bank’s Monetary Policy
On the monetary policy front, Union Bank believes the current rate-cutting cycle by the RBI has concluded, maintaining a terminal repo rate of 5.50%. The RBI has already reduced the repo rate by 100 basis points since early 2025. The report adds, “Similar to the MPC, we expect a gradual increase in CPI from August 2025 onwards as favourable base effects fade and CPI likely breaches the 4% mark in H2-FY26.”
Meanwhile, India’s CPI-based inflation in May 2025 dropped to a six-year low of 2.82%, aided by lower prices of food staples, household items, and a favorable base. The inflation rate has remained within the RBI’s 2–6% comfort zone since October 2024, when it last crossed the 6% ceiling.
(From ANI)
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