New Delhi [India], October 2 : SBI Research expects CPI inflation to rise to around 5.65 per cent in September and cross 6.5 per cent in October and November, before easing below 6 per cent in early 2027.
In its pre-Monetary Policy Committee (MPC) report released on Friday, SBI Research said the Reserve Bank of India (RBI) may raise the policy repo rate by at least 25 basis points at its October 5-7 monetary policy meeting, citing rising inflation, global risks and pressure on the rupee.
“We believe the balance of risks has tilted decisively towards a 25-bps rate hike at this juncture,” the report said.
SBI Research said the shift towards a rate hike was driven by broadening inflationary pressures, worsening global macroeconomic conditions, changing liquidity conditions and renewed repricing of risks in global markets.
The current policy repo rate stands at 5.25 per cent. A 25-basis-point hike would mark a shift from the RBI’s previous policy stance.
At its August 3-5 meeting, the MPC unanimously kept the repo rate unchanged at 5.25 per cent and retained its neutral stance. The RBI had said it wanted greater clarity on the direction and composition of inflation before taking further policy action.
The central bank had projected FY27 GDP growth at 6.7 per cent and CPI inflation at 5 per cent.
According to SBI Research, inflationary pressures have strengthened since the August policy meeting. Retail inflation rose to 4.82 per cent in August from 4.45 per cent in July, with price pressures spreading across a wider range of items.
The report said 22 commodities accounted for 90 per cent of the weighted contribution to CPI inflation in January. By August, the number had increased to 51, indicating that inflationary pressures had become more broad-based.
SBI Research also highlighted weakness in the rupee as a key risk. It attributed the pressure on the currency to a strong US dollar, foreign currency demand from oil marketing companies and corporates, and continued selling by foreign portfolio investors.
The research house also flagged risks from the weak monsoon. The 2026 southwest monsoon stood at 87 per cent of the long-period average, while 43 per cent of districts received deficient rainfall.
SBI Research said strong El Niño conditions and below-normal rainfall in October could pose risks to Rabi crops and add to food inflation pressures.
The research house expects the RBI to raise its FY27 GDP growth forecast by 30 basis points and its inflation projection by 20 basis points at the October policy review.
The RBI's October MPC meeting is scheduled to be held from October 5 to 7.