MUMBAI - State Bank of India (SBI) Research, in its latest Ecowrap report, has advocated for a 25 basis points (bps) rate hike by the Reserve Bank of India (RBI) in its upcoming October monetary policy review, with a potential follow-up hike in December. The report highlights that the rate hike call remains independent of any forthcoming US Federal Reserve actions and serves as a countermeasure against persistent exogenous shocks, rising crude oil prices, and market volatility.
According to the report, global crude prices recently breached the $100 per barrel mark due to intensifying geopolitical tensions in the Middle East and critical shipping corridors like the Red Sea. Quantile regression estimates by SBI indicate that Brent crude could reach up to $123 per barrel over the next fortnight under sustained upward pressure. Additionally, domestic Consumer Price Index (CPI) inflation is showing incipient signs of generalization across sectors where input costs are outpacing output prices—particularly in crude petroleum, natural gas, beverages, and pharmaceuticals. With benchmark Indian 10-year G-sec yields crossing 7%, SBI economists stress that clear, credible, and proactive communication from the central bank is critical to anchor inflation expectations and maintain policy agility.
