SBI Research Flags September CPI Rise to 5.65%, Outlook Points to RBI Rate Hike

SBI Research analysts project a significant acceleration in India's consumer price inflation over the next several months, forecasting that the Consumer Price Index (CPI) could reach 5.65% by September. The outlook further indicates that inflation may surpass the 6.5% threshold in both October and November. The current transmission of price pressures has expanded beyond isolated sectors, with inflationary forces now affecting a broader range of commodity groups compared to the period surrounding the last monetary policy meeting. A secondary driver exacerbating this trend is the depreciation of the national currency, which mechanically increases the landed cost of imports and passes those higher expenses directly to end consumers. Faced with this trajectory, the Reserve Bank of India (RBI) is expected to revise its macroeconomic baseline during its upcoming policy review. The central bank is anticipated to adjust its forecasts for both target inflation and GDP growth rates, changes that will likely inform subsequent decisions regarding interest rates and the broader cost of credit within the economy.

SBI Research expects India’s retail inflation to accelerate to around 5.65% in September and cross 6.5% in October and November, before easing below 6% in early 2027.In its pre-Monetary Policy Committee report, the research arm of State Bank of India said the Reserve Bank of India could raise the policy repo rate by at least 25 basis points at its October 5-7 meeting. It cited broader price pressures, global economic risks, changing liquidity conditions and pressure on the rupee.India Growth Outlook: FY27 GDP May Surpass RBI’s 6.6 Per Cent Forecast If Q1 Momentum Continues, Says SBI Research Inflation pressures broadenThe repo rate currently stands at 5.25%. The Monetary Policy Committee had kept the rate unchanged at its August 3-5 meeting and maintained a neutral stance while seeking greater clarity on inflation.SBI Research said retail inflation increased to 4.82% in August from 4.45% in July, with price pressures spreading across a wider range of goods. According to its analysis, 22 commodities accounted for 90% of the weighted contribution to consumer price inflation in January. By August, that number had risen to 51, indicating a broader-based increase in inflationary pressures.The research house also highlighted the rupee’s weakness, attributing pressure on the currency to a stronger US dollar, foreign currency demand from oil marketing companies and corporates, and continued selling by foreign portfolio investors. Monsoon and global risks in focusWeather conditions could add to inflation risks, according to SBI Research. The 2026 southwest monsoon was 87% of the long-period average, while 43% of districts recorded deficient rainfall.The report warned that strong El Niño conditions and below-normal rainfall in October could affect Rabi crops and add to food price pressures.SBI Research also expects the RBI to revise its FY27 economic projections at the October policy review. It estimates that the central bank could raise its GDP growth forecast by 30 basis points and increase its inflation projection by 20 basis points.The RBI has previously projected FY27 GDP growth at 6.7% and CPI inflation at 5%. The October MPC meeting is scheduled from October 5 to 7.