SBI Research Sees September Inflation At 5.65%, Expects RBI To Hike Repo Rate

SBI Research expects India’s retail inflation to accelerate to around 5.65% in September and cross 6.5% in October and November, before easing below 6% in early 2027.

In its pre-Monetary Policy Committee report, the research arm of State Bank of India said the Reserve Bank of India could raise the policy repo rate by at least 25 basis points at its October 5-7 meeting.

It cited broader price pressures, global economic risks, changing liquidity conditions and pressure on the rupee.

Inflation pressures broaden

The repo rate currently stands at 5.25%. The Monetary Policy Committee had kept the rate unchanged at its August 3-5 meeting and maintained a neutral stance while seeking greater clarity on inflation.

SBI Research said retail inflation increased to 4.82% in August from 4.45% in July, with price pressures spreading across a wider range of goods.

According to its analysis, 22 commodities accounted for 90% of the weighted contribution to consumer price inflation in January. By August, that number had risen to 51, indicating a broader-based increase in inflationary pressures.

The research house also highlighted the rupee’s weakness, attributing pressure on the currency to a stronger US dollar, foreign currency demand from oil marketing companies and corporates, and continued selling by foreign portfolio investors.

Monsoon and global risks in focus

Weather conditions could add to inflation risks, according to SBI Research. The 2026 southwest monsoon was 87% of the long-period average, while 43% of districts recorded deficient rainfall.

The report warned that strong El Niño conditions and below-normal rainfall in October could affect Rabi crops and add to food price pressures.

SBI Research also expects the RBI to revise its FY27 economic projections at the October policy review. It estimates that the central bank could raise its GDP growth forecast by 30 basis points and increase its inflation projection by 20 basis points.

The RBI has previously projected FY27 GDP growth at 6.7% and CPI inflation at 5%. The October MPC meeting is scheduled from October 5 to 7.