India's December CPI hits 1.33%, RBI target stays in reach
India's December CPI hits 1.33%, RBI target stays in reach
December 2025 CPI at 1.33% underscores a muted inflation path, with food prices nudging up and a new CPI base year ahead, guiding RBI decisions.
December 2025’s retail inflation figure stood at 1.33%, the last print in the current CPI series before a revamped index goes live next month. The statistics ministry will publish a revised CPI based on a 2024 base year and an expanded basket drawn from the 2023-24 Household Consumption Expenditure Survey, replacing the 2012-based framework. This shift will complicate direct year-on-year comparisons but aims to reflect current consumption more accurately.
The RBI has a clear mandate to target 4% inflation in the medium term within a 2-6% band. After cutting the policy repo rate by 125 basis points in 2025 to 5.25%, the central bank has indicated inflation could edge higher in the near term. Yet the December print continues a stretch where inflation has stayed below the RBI’s target for 11 consecutive months, even as some forecasters anticipate a modest uptick ahead.
The October–December quarter averaged about 0.8% inflation, slightly above the MPC’s Q3 FY26 forecast. Analysts expect the RBI to face a similar pace of inflation in early 2026, keeping a pause on the February 6 MPC meeting on the table. The full impact of the new CPI series will unfold over the next few months, with January data under the new methodology due on February 12, alongside the February policy deliberations and the Union Budget on February 1.
Food inflation remained negative for the seventh straight month even as overall price pressures firmed a little in December. The shift to the new CPI base and basket may alter historical comparisons, but the overarching trend of disinflation persists as policymakers balance growth with price stability.
