India’s retail inflation likely edged higher in December 2025 to 1.66 per cent from 0.71 per cent in November, driven by a strengthening in food prices across most segments, according to projections by Union Bank of India.The official Consumer Price Index (CPI) data for December is scheduled to be released on January 12, 2026, or the next working day if the date is a holiday.Despite the sequential rise, inflation is expected to remain well below the 5.2 per cent recorded in December 2024, even as the favorable base effect starts to fade, the bank said. Core inflation, which excludes food and fuel, is projected to rise to 4.68 per cent, largely due to a renewed rally in gold prices during December, reported news agency ANI.Food inflation is likely to stay in negative territory, though less so than in November. “We expect food CPI to print -1.19% as against -2.78% last month and a high base of 7.7% last Dec,” the Union Bank of India report said, noting that month-on-month food prices increased across most categories except a few segments such as milk. The assessment is based on on-the-ground prices collected by the Department of Consumer Affairs.According to the report, tomatoes recorded the sharpest price gains, as early winter boosted demand while October rains disrupted supply. The bank cautioned that while food inflation is expected to remain largely negative in the third quarter of FY26, there are upside risks from unseasonal winter rains and potential supply chain disruptions.With inflation largely under control, the Reserve Bank of India in December cut its CPI inflation forecast for 2025-26 to 2.0 per cent from 2.6 per cent earlier. Quarterly projections place inflation at 0.6 per cent in Q3 and 2.9 per cent in Q4, before rising to 3.9 per cent in Q1 of 2026-27 and 4.0 per cent in Q2, still within the RBI’s target range.RBI Governor Sanjay Malhotra described the current macroeconomic situation as a “rare goldilocks period” of strong growth and very low inflation, ANI reported. His remarks followed the central bank’s decision to cut the repo rate by 25 basis points to 5.25 per cent in December, with nearly 80 per cent of the CPI basket showing inflation below 4 per cent, indicating broad-based easing.
