SBI predicts inflation below 3 percent soon

New Delhi

India's retail inflation is expected to stay below 3 per cent from April to June 2025, according to a new report from the State Bank of India (SBI). The sharp drop in food prices helped reduce the Consumer Price Index (CPI) inflation to 3.34 per cent in March 2025 a 67-month low. SBI believes this drop signals a stable trend for the rest of the fiscal year 2025-26 (FY26). It now expects average inflation to remain under 4 per cent for the full year, with the first quarter staying below 3 per cent. The bank also projects full-year average inflation to range between 3.7 and 3.8 per cent, unless food prices suddenly rise. Core inflation, which excludes food and fuel prices, moved slightly upward over the past year. It rose from 3.28 per cent in August 2024 to 4.1 per cent by March 2025. This increase was mainly due to higher gold prices as investors turned to gold amid global uncertainties. Without gold, core inflation was just 3.2 per cent. SBI expects core inflation, including gold, to remain between 4.0 and 4.3 per cent in FY26. With both inflation and growth staying moderate, the bank says India is entering a Goldilocks period a time of low inflation and steady economic growth. Nominal GDP growth is estimated at 9 to 9.5 per cent, slightly below the government's 10 per cent target. SBI suggests that this may be a good time for the Reserve Bank of India to lower interest rates.