Commerzbank analysts explain that the recent India CPI series shows January inflation was 2.8% year-on-year, which is within the RBI’s target range of 2-6%. A weighted basket reduces the proportion of food and should dampen variability. With inflation subdued and growth supported by fiscal policy and trade agreements, the RBI is expected to leave the key interest rate unchanged at 5.25%.
Changing the weight of inflation and policy implications
“January CPI increased by 2.8% y/y in the new CPI series with the base year of 2024, compared to 1.3% in December in the old series with the base year of 2014.”
“Under the new CPI series, inflation has returned to the Reserve Bank of India’s (RBI) target range of 2-6% for the first time since August 2025.
“The reweighing should reduce overall volatility and be less susceptible to wild fluctuations in food prices due to weather.”
“On the monetary policy front, the RBI is expected to keep the policy rate unchanged at 5.25% at its next meeting on April 8.
“Inflation is expected to remain subdued in the near term.”
(This article was created with the assist of an artificial intelligence tool and has been reviewed by an editor.)
