The Reserve Bank of India (RBI) has projected inflation to ease to 4.2% in FY26 while retaining the forecast for the current financial year at 4.8%.

Unveiling the last bi-monthly monetary policy of this fiscal, RBI Governor Sanjay Malhotra said food inflation pressures, in absence of any supply side shock, should see a significant softening due to good kharif production, winter-easing in vegetable prices and favourable rabi crop prospects.

He further said core inflation is expected to rise but remain moderate.

Rising uncertainty in global financial markets coupled with continuing volatility in energy prices and adverse weather events, presents upside risks to the inflation trajectory, he cautions.

Taking all these factors into consideration, consumer price inflation (CPI) for 2024-25 is projected at 4.8% with Q4 at 4.4% (from 4.5% earlier), Malhotra said, after chairing his first Monetary Policy Committee meeting.

In October last year, inflation had surged to a 14-month high of 6.21% due to a sharp rise in food prices, but eased in November to 5.48% and a four-month low of 5.22% in December.

"Assuming a normal monsoon next year, CPI inflation for 2025-26 is projected at 4.2% with Q1 at 4.5% (from 4.6% earlier); Q2 at 4%, the same as earlier. ; Q3 at 3.8%; and Q4 at 4.2%," he said, and added the risks are evenly balanced.