Sign Up Log in

    MUFG’s Lloyd Chan says India’s rebased CPI rose 2.8% year on year, led by food prices, keeping the RBI unchanged

    by VT Markets
    /
    Feb 14, 2026
    India’s CPI inflation, using the rebased 2024 series, rose to 2.8% year-on-year. Food prices were the main driver. At 2.8%, inflation was within the Reserve Bank of India’s 2% to 6% target band. This supported keeping interest rates unchanged at the RBI’s April policy meeting.

    Inflation Backdrop And Policy Implications

    The article says it was created with help from an artificial intelligence tool and then reviewed by an editor. In early 2025, inflation in India was calm. CPI came in at a mild 2.8% year-on-year. This was comfortably inside the RBI’s target band, so the central bank had room to keep rates steady. With policy more predictable, rate markets also saw less volatility. In February 2026, the picture is very different. Price pressures are rising. The January 2026 CPI report showed inflation picking up to 5.1%, driven by higher global energy prices and still-high domestic food inflation. That puts inflation much closer to the RBI’s 6% upper limit and shifts attention toward possible tightening. This trend is also backed by strong growth. Latest data shows GDP growth for Q3 of FY 2025–26 was 7.8%. Solid growth can lift demand, which can add to inflation pressure. That strengthens the case for the RBI to consider rate hikes to cool the economy. The RBI’s tone has also become more cautious, with more emphasis on bringing inflation back toward the 4% midpoint.

    Trading Considerations For Rates And Volatility

    For derivative traders, last year’s “stable rates” approach may no longer work. It may now make more sense to position for a more hawkish RBI, using tools such as Overnight Index Swaps (OIS). Paying fixed on one-year OIS is a direct way to express a view that the RBI will raise rates within the next 12 months. Uncertainty about when hikes happen—and how large they are—can also push volatility higher. That can create opportunities in options on 10-year government bond futures. Buying straddles or strangles can benefit from a big move in bond prices, whether bonds fall on a hike or rally if the RBI unexpectedly holds rates. Create your live VT Markets account and start trading now.

    here to set up a live account on VT Markets now

    In This Article

    see more

    Back To Top
    server
    Click Click Click Click Click
    Follow us on

    Hello there 👋

    How can I help you?

    Chat with our team instantly

    Live Chat

    Start a live conversation through...

    • Telegram
      hold On hold
    • Coming Soon...

    Hello there 👋

    How can I help you?

    telegram

    Scan the QR code with your smartphone to start a chat with us, or click here.

    Don’t have the Telegram App or Desktop installed? Use Web Telegram instead.

    QR code