New Inflation Data Unlikely to Shift RBI Policy Soon, Say Economists

The headline CPI inflation printed at 2.75 per cent in January 2026 as per the new CPI series (base year 2024), well below the mid-point of the RBI MPC's target range of 2 per cent-6 per cent.

"We do not expect the new inflation series to materially influence policy in the near term. An extended rate pause looks likely, underpinned by a cyclical upturn in both growth and inflation and improving confidence following the conclusion of the US-India trade negotiations," said Madhavi Arora, Chief Economist, Emkay Global Financial Services.

The year-on-year (YoY) inflation rates across 11 of the 12 divisions of the CPI ranged between 0.1 per cent and 3.4 per cent -- below the 4 per cent-mark, with the personal care, social protection and miscellaneous goods and services being the outlier with a 19.0 per cent inflation, largely reflecting the boom in gold and silver prices.

Aditi Nayar, Chief Economist at ICRA Ltd, said that the new CPI series is not comparable to the old series owing to the change in composition, weights and calculation methodology.

"Nevertheless, with a dip in the weight of the food and beverages (F&B) segment, we had expected the headline print to be slightly higher than our estimate of 2.5 per cent for January 2026 as per the old series, which has been the case," she noted.

Interestingly, within the F&B segment, the weight of vegetables and pulses has declined slightly, which may reduce the peaks and troughs for the headline print vis-a-vis the old series, given that these items have seen quite large variability in their monthly inflation rates.

However, the weight of cereals, which had a relatively lower variance in monthly inflation rates, has come down quite sharply, which may partly offset the positive impact of the latter.

"Our preliminary assessment is that the expected uptick (as per the old series) in the CPI inflation in FY2027 relative to FY2026 was largely anticipated to be driven by the F&B segment. With a somewhat lower weight for F&B in the new series vis-a-vis the old series, the expected base-effect led uptick in the headline print in FY2027 would likely be tempered," explained Nayar.

With another CPI inflation print for February due to be released before the next MPC meeting, there may be some more clarity on interpreting the CPI data, said economists.

- IANS