Archive · 11 Sep 2026
SBI Research Sees October and December RBI Rate Hikes
SBI Research thinks India’s central bank may raise interest rates twice by the end of December.
Each increase could be 0.25 percentage points, also called 25 basis points.
The main concern is that oil has become more expensive.
Costlier oil can make transport, cooking fuel, food and other goods more expensive.
The report says inflation could reach 6.5% or higher in October and November if oil stays expensive.
Overall inflation rose between January and July, but underlying inflation rose only a little.
The report also says more types of goods are now contributing to inflation.
The central bank must balance fighting inflation with making sure banks have enough money to lend.
SBI Research says careful communication and a measured rate increase could help keep people’s inflation expectations stable.
SBI Research expects the Reserve Bank of India to raise the repo rate by 25 basis points in October and another 25 basis points in December.
Crude oil has risen above $100 a barrel, and SBI Research estimates prices could reach $123 or average $105 over the next 15 days.
If oil prices stay high, India’s October-November inflation could reach 6.5% or more, the report said.
Overall CPI inflation rose from 2.73% in January to 4.45% in July, while core inflation increased more modestly to 3.87%.
India’s 10-year government bond yield could rise from above 7% toward 7.15% or higher amid imported inflation and policy uncertainty.
- Who
- SBI Research and the Reserve Bank of India are central to the rate outlook; households, businesses and financial markets could be affected.
- What
- SBI Research forecasts two 25-basis-point repo-rate increases and warns that elevated crude oil prices could push inflation higher.
- When
- The report calls for a possible hike in October and another in December; its inflation analysis covers January through July, with risks for October and November.
- Where
- The outlook concerns India, while oil-market risks involve global routes and tensions around the Strait of Hormuz, the Red Sea and Bab-el-Mandeb.
- Why
- Higher oil prices, broader inflation and incomplete pass-through of input costs could increase inflation risks and pressure the Reserve Bank of India to act.
Case for a Rate Increase
Reasons for Caution
Inflation threat
Case for a Rate Increase
SBI Research says elevated crude prices, broader price pressures and delayed pass-through of input costs could make inflation more entrenched, supporting a preemptive hike.
Reasons for Caution
Core inflation remains relatively subdued, rising only to 3.87% by July, which could argue for avoiding an overly aggressive response.
Liquidity management
Case for a Rate Increase
A measured rate increase could show that the Reserve Bank of India is responding to external shocks and help anchor inflation expectations.
Reasons for Caution
SBI Research warns that aggressive liquidity withdrawal could create a deficit during periods of stronger credit demand, so tools such as VRRR auctions or the Market Stabilisation Scheme may be preferable.
- Expected October repo-rate move
- 25 basis points higher, according to SBI Research
- Expected December repo-rate move
- Another 25 basis points higher
- Total expected increase by December
- 50 basis points
- July CPI inflation
- 4.45%, compared with 2.73% in January
- July core CPI inflation
- 3.87%, compared with 3.67% in January
- Oil-price risk
- Crude was above $100 per barrel; forecasts cited include up to $123 or an average of $105 over 15 days
- 10-year Indian government bond yield
- Already above 7%; SBI Research sees it moving toward 7.15% or higher