Mumbai: India may require a calibrated monetary response as inflation pressures broaden, with the Reserve Bank of India’s October and December policy meetings offering room for two consecutive 25-basis-point rate increases, State Bank of India said.
In its latest Ecowrap report, SBI described the two meetings as a 'perfect pitch' for nuanced rate action, followed by a pause to assess incoming economic data and the impact of tighter policy.
Inflation becomes broad-based
Retail inflation, measured by the Consumer Price Index, accelerated to 4.82 percent in August 2026 from 4.45 percent in July, reflecting price increases across almost every division. Rural inflation remained notably higher at 5.23 percent, against 4.31 percent in urban areas.
Food inflation climbed to 5.66 percent, propelled by costlier onions, ginger and garlic. Core inflation, excluding food, fuel, household and transport components, also advanced to 4.16 percent from 3.87 percent in the preceding month.
SBI’s analysis showed price pressures spreading across a wider range of goods. In January 2026, only 22 commodities accounted for 90 percent of the weighted contribution to headline inflation. That number more than doubled to 51 by August.
Similarly, the contribution of the 25 biggest inflation drivers, excluding gold and silver, fell sharply to 62 percent in August from 83 percent in January. The shift indicates that price increases are no longer concentrated in a limited basket, making inflation harder to contain.
CPI may breach 6.5 percent
SBI expects headline CPI inflation to cross 6.5 percent before easing below 6 percent in early 2027. This trajectory, it said, strengthens the case for measured tightening rather than a larger, disruptive policy move.
Oil adds to uncertainty
The outlook is further clouded by the widening conflict in West Asia. SBI warned that heightened geopolitical risks could keep crude oil above USD 100 a barrel in the near term and intensify volatility.
Persistently expensive oil could raise transport and production costs, aggravate domestic price pressures and complicate the MPC’s effort to balance inflation control with economic growth over the coming policy meetings.
