India CPI Preview: Inflation Set to Rise in December

India’s December 2025 CPI release, due on January 12, 2026, is poised to underscore the economy’s remarkable pivot into a low‑inflation regime. We anticipate CPI to come in at 1.15 y/y owing to firmer food pricing and a mild re‑acceleration in core components. A continued softness in global energy costs will also be supportive of lower CPI reading.

The recent months have delivered unusually benign price pressures—October printed 0.25%, November 0.71%, and Q3 FY26 averaged just 0.6% thanks to generous base effects. While December is expected to see  month‑on‑month gains in select vegetables, last year’s 7.7% food inflation peak still suppresses annual comparisons. Meanwhile, despite portfolio outflows into China–South Korea tech equities, the subdued global commodity backdrop and contained domestic demand have helped limit currency pass-through, keeping imported inflation risks manageable, even with the rupee under mild pressure

A 1.1% print would hand the RBI a cleaner runway into early‑2026 policy deliberations, but the window may be shorter than it looks. With Q4 FY26 inflation projected near 2.4% (still below 4% target) and a new CPI series rebasing due in February 2026, the central bank is likely to cut interest rate further in Q1 by 25bps to 5%, in our view.