Union Bank Projections Indicate Slower Inflation for FY26

Union Bank of India's latest report suggests consumer inflation for the fourth quarter of the financial year 2026 is expected to be 3%, marginally below the Reserve Bank of India's forecast of 3.2%. This revised prediction highlights a trend of inflation staying under the central bank's projections in upcoming quarters.

The bank's analysis attributes the changes in projections to the Ministry of Statistics and Programme Implementation's decision to alter the base year for inflation calculation, switching from 2012 to 2024. This shift comes as February's inflation data showed a rise, with CPI inflation reaching 3.21%, up from January's 2.74%, a notable 11-month high despite being within the comfort zone of the RBI.

In an unexpected turn, food inflation surged to 3.35% in February, surpassing Union Bank's original estimate of 2.55%. The report remarks this rise came as a surprise, with significant drops seen in vegetable prices, yet projects a mostly subdued food inflation for FY26, potentially rising in March due to seasonal and geopolitical factors.