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SBI Warns of Broadening Inflation, Signals Two Rate Hikes
Prices in India rose faster in August than in July.
Food became more expensive, especially onions, ginger and garlic.
Prices also rose in many other parts of the economy.
SBI says inflation is spreading instead of being limited to a few goods.
It thinks the Reserve Bank of India could raise interest rates by 25 basis points in both October and December.
Higher rates can help slow price increases, but they can also make borrowing more expensive.
SBI expects inflation to rise above 6.5% before easing in early 2027.
Higher oil prices caused by conflict in West Asia could make the problem worse.
State Bank of India said India may need two consecutive 25-basis-point rate increases at the October and December policy meetings.
Retail inflation rose to 4.82% in August 2026 from 4.45% in July, with rural inflation reaching 5.23%.
Food inflation climbed to 5.66%, while core inflation increased to 4.16% from 3.87%.
Inflationary pressure broadened, with 51 commodities accounting for 90% of headline inflation’s weighted contribution in August, compared with 22 in January.
SBI expects inflation to exceed 6.5% before falling below 6% in early 2027, while oil prices could remain above $100 per barrel amid West Asia tensions.
- Who
- State Bank of India issued the assessment, concerning the Reserve Bank of India and its Monetary Policy Committee.
- What
- SBI said India may need two consecutive 25-basis-point interest-rate increases, followed by a pause, as inflation broadens.
- Where
- India, with additional risks linked to the widening conflict in West Asia.
- When
- The recommendation concerns the October and December policy meetings; the cited inflation data covers August 2026, with easing expected in early 2027.
- Why
- Retail, food and core inflation are rising across a broader range of goods, while potentially higher crude-oil prices could intensify domestic price pressures.
Key facts
- August retail inflation
- 4.82%, up from 4.45% in July 2026
- Rural inflation
- 5.23% in August 2026
- Urban inflation
- 4.31% in August 2026
- Food inflation
- 5.66% in August 2026
- Core inflation
- 4.16%, up from 3.87% in the preceding month
- Potential rate increases
- Two 25-basis-point hikes at the October and December policy meetings
- SBI inflation forecast
- Headline CPI could exceed 6.5% before falling below 6% in early 2027
- Oil risk
- Crude oil could remain above $100 per barrel amid heightened geopolitical risks
Sources
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