SBI sees India CPI averaging 5% in FY27 with prolonged RBI pause

The RBI's outstanding net forward position rose to $106.6 billion in May from $95.3 billion in April, the report noted. Higher demand in both spot and forward merchant markets kept pressure on the rupee, explaining why the currency has not strengthened despite strong inflows.

The report followed the June CPI print, which rose to 4.38% year-on-year from 3.93% in May. Food prices, transport costs and services inflation drove the increase. Core inflation, under the new classification, rose to 4.21%.

Transport inflation recorded the sharpest jump, rising to 4.3% in June from 1.8% in May. Restaurants and accommodation inflation hit 6.9%. Food and beverages inflation moved higher to 5.1%, making it a key contributor to the headline increase.

Rural CPI rose to 4.74% in June, while urban inflation hit 3.92%. The inflation outlook will depend on domestic food prices, global commodity trends and exchange rate movements, the report said. The rupee's strength is expected to remain an important cushion against imported inflation risks.