India’s new CPI series (base year 2024) puts January inflation at 2.8% year-on-year. Under the old series (base year 2014), December inflation was 1.3%.
The 2.8% reading keeps inflation within the Reserve Bank of India’s 2–6% target band. It is reported to be the first time inflation has been in that range since August 2025.
Inflation Back In Target Band
The CPI basket has been reweighted to reduce the share of food. This should lower volatility and reduce sharp moves tied to weather-driven food prices.
With inflation expected to stay contained in the near term, the RBI is expected to keep the policy rate unchanged at 5.25%. The next policy meeting is scheduled for 8 April.
The report also links the outlook to growth support from fiscal policy and trade deals. The article notes it was produced using an AI tool and reviewed by an editor.
With the new CPI series showing January inflation at 2.8%, inflation is back inside the Reserve Bank of India’s target band for the first time since the brief spike in August 2025. This supports our view that the RBI will keep the policy rate steady at 5.25% at its April meeting. That should help keep interest rate markets calm.
Market Volatility And Options Setup
The new inflation calculation gives less weight to volatile food prices. This should make future inflation readings more stable.
For us, this points to lower implied volatility. This view is supported by the India VIX index, which has been trading in a quiet range near 14. In this kind of market, strategies that benefit from stability—such as selling options premium on the Nifty 50—may look more attractive in the coming weeks.
Stable inflation and a predictable central bank are also supportive for the currency. USD/INR has traded in a tight 83.10 to 83.60 range for much of the last quarter, and this news supports a continuation of that pattern. Strategies that benefit from the rupee staying in a defined range, such as iron condors, could fit this setup.
A steady policy rate also reduces the risk of near-term upward pressure on government bond yields. The 10-year government bond yield has held near 7.10% since the start of the year. This report gives little reason to expect a sudden jump in yields, which makes large short positions in bond futures look risky.
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