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Interest rates are likely to be predictable, lower and stable during the whole 2026

ICICIdirect Research 16 Jan 2026 DISCLAIMER

CPI inflation moved higher in December to 1.33% YoY compared with 0.71% in Nov but is lower than market expectation of Round 1.6%. Overall inflation has bottomed-out and is normalising from the lows of Oct to Dec quarter (average of Oct-Dec at 0.8%).


The year 2025 saw a lot of abnormality in inflation data print such as:

Food inflation (CFPI) averaged -0.2% in 2025 (December 2025 prints was -2.7%). Within Food, vegetable inflation has averaged -14%, Pulses has averaged at -10%, Spices has averaged at -4%. On the other hand, Oil & Fats has averaged at 15% while fruits has averaged at 12%.
Within Non-food, Gold led inflation has averaged 17%
Overall, headline CPI has averaged at 2.2% for the year 2025.

 
A lot of these abnormal prints are likely to normalize in the year 2026 particularly post April 2026 and accordingly inflation is likely to average around 4% from April to December. This will lend stability and predictable interest rate environment in the year 2026. Interest rates are likely to remain predictable, lower and stable during the whole of 2026.  

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