SBI Research Retains 50 BPS Repo Rate Hike Call for December as Inflation Pressures Broaden

New Delhi, Oct 22 (KNN) SBI Research has retained its forecast of a 50-basis-point (BPS) repo rate hike in December, citing persistent inflationary pressures, elevated crude oil prices and the Reserve Bank of India’s (RBI) shift towards a tighter monetary policy stance.

In a report analysing the October Monetary Policy Committee (MPC) minutes, SBI Research said the RBI Governor Sanjay Malhotra’s communication indicated a greater focus on future risks and the possibility of further monetary tightening.

The report outlined two possible options for the December policy: a 50-basis-point repo rate hike to 6 per cent, or a 25-basis-point increase to 5.75 per cent accompanied by an asymmetric widening of the liquidity adjustment facility (LAF) corridor, ANI reported.

Under the second option, the marginal standing facility (MSF) rate would rise to 6.25 per cent, while the standing deposit facility (SDF) rate would remain unchanged at 5.50 per cent. SBI Research said this approach could help maintain orderly market functioning amid global uncertainty.

The MPC had unanimously raised the repo rate by 25 basis points to 5.50 per cent earlier this month and shifted its stance to calibrated tightening. 

In the October MPC minutes, the Governor indicated that future decisions would depend on inflation and growth trends, with the policy choice being either a rate hike or a pause.

Inflation Risks Remain Elevated

SBI Research said the number of commodities accounting for 75 per cent of the Consumer Price Index’s weighted contribution increased from 25 in August to 31 in September, indicating a broader spread of price pressures.

The report expects inflation to peak below 6.5 per cent in November and projects dated Brent crude prices to average USD 110 per barrel over a 15-day forecast period.

The RBI’s October MPC minutes projected retail inflation at 6 per cent in the third quarter of FY2026-27, moderating to 5.7 per cent in the fourth quarter. The central bank has also projected GDP growth of 7.1 per cent for the financial year.

The next MPC meeting is scheduled for December 2-4, when policymakers will reassess inflation and growth conditions.

(KNN Bureau)