4 hrs ago
SBI Expects Two 25-Basis-Point Repo Rate Hikes Amid Inflation Risks
The State Bank of India’s research team thinks interest rates in India may need to rise twice.
It expects a 25-basis-point increase in October and another one in December.
The team is worried because oil has become more expensive.
Higher oil prices can make many goods and services cost more.
It also sees signs that price increases are spreading across more parts of the economy.
Government bond yields are rising in India and around the world too.
The research team believes these rate increases could help the Reserve Bank of India show that it can respond quickly.
It expects short-term extra money in the banking system to decrease over the next three or four months.
SBI’s Economic Research Department expects the Reserve Bank of India to raise the repo rate by 25 basis points in October and again in December.
The recommendation reflects rising crude oil prices, signs of broader CPI inflation and global bond yields reaching multiyear highs.
The ERD said crude prices recently crossed $100 per barrel and could reach $123 per barrel over the next 15 days at the 60th quantile.
It warned that Indian 10-year bond yields could rise toward 7.15% or higher after benchmark yields crossed 7%.
The report said short-term banking-system liquidity should be absorbed over the next three to four months, making structural liquidity measures less likely.
- Who
- State Bank of India’s Economic Research Department, led in the report by Group Chief Economic Adviser Soumya Kanti Ghosh.
- What
- The ERD expects two 25-basis-point Reserve Bank of India repo rate hikes, one in October and another in December.
- Where
- India, with the recommendation also considering global oil prices, bond yields and United States monetary-policy expectations.
- When
- The report was published on September 11, 2026; the proposed hikes are expected in the upcoming October and December policies.
- Why
- Because crude oil prices are rising, CPI inflation shows early signs of broadening, and global and Indian bond yields are increasing.
Key facts
- Expected October hike
- 25 basis points
- Expected December hike
- 25 basis points
- Total proposed increase
- 50 basis points
- Recent crude price
- Above $100 per barrel
- Possible crude price
- $123 per barrel over the next 15 days at the 60th quantile
- Indian benchmark yield
- Above 7%; the 10-year yield could reach 7.15% or higher
- Banking liquidity outlook
- The liquidity bulge is expected to taper and be absorbed within three to four months
Quotes
Soumya Kanti Ghosh
Group Chief Economic Adviser at SBI
“Now, we strongly advocate a 25-bps rate hike in the upcoming October policy (followed by another in December in quick succession), factoring the myriad evolving “undershoots”… Our rate hike call is agnostic to August CPI inflation print that could come around 4.8-4.9 per cent.”
thehindubusinessline.com
“Going forward this could result in greater pass-through from producer prices to final prices especially in case of crude petroleum & natural gas as its imported share of 31.3 per cent.”
thehindubusinessline.com
Sources
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