The change in the base year of the Consumer Price Index (CPI) has not had much impact on monetary policy. According to the report of Union Bank of India, the Reserve Bank of India (RBI) may keep interest rates stable for now instead of changing them in the coming months.
What was the inflation rate in January?
According to the report, according to the new base year 2023-24, the inflation rate (headline CPI) in January 2026 was 2.75 percent, which is as per the estimate. At the same time, core inflation (which includes less volatile items like food and fuel) declined to 3.46 percent, which shows a better situation than the previous estimate.
On what basis does MPC take decisions?
The report said that changing the base year has made the method of calculating the data more accurate and comprehensive, but it will not immediately lead to any major change in the policy thinking of the RBI. The Monetary Policy Committee (MPC) of RBI will look more carefully at not just the annual inflation figures but also the actual pace of inflation and its future trend.
What caused the decline in core CPI?
According to the data under the new base year, the decline in core CPI was mainly due to the weight of Gold CPI falling from 1.1 per cent to 0.62 per cent. At the same time, core inflation excluding gold increased by 2.91 percent, indicating that underlying inflation trends still remain weak.
Increase in food inflation
Meanwhile, food inflation has also increased slightly to 2.11 percent. In the new base year, the weightage of food items has been reduced from about 46 percent earlier to about 40 percent and more markets, cities and commodities have been included, making the data more comprehensive. The overall conclusion of the report is that despite the change in the base year, the RBI will not change interest rates in a hurry. Its focus in the coming quarters will be on managing inflation trends and liquidity in the market, hence the rates are likely to remain unchanged for now.
