India may need a calibrated monetary policy response to rising inflation, with the October and December meetings of the Reserve Bank of India’s Monetary Policy Committee (MPC) offering an opportunity for two successive 25-basis-point rate hikes, according to a report by State Bank of India (SBI) on Tuesday.
SBI, in its latest Ecowrap report, said retail inflation based on the Consumer Price Index (CPI) rose to 4.82 per cent in August 2026 from 4.45 per cent in July, driven by a broad-based increase across almost all divisions. Rural inflation remained significantly higher at 5.23 per cent, compared with 4.31 per cent in urban areas.
Food inflation also climbed to 5.66 per cent in August, led by elevated prices of select items such as onions, ginger and garlic. At the same time, core inflation, excluding food, fuel, household and transport components, increased to 4.16 per cent from 3.87 per cent in July.
SBI said its analysis of inflation data through August indicates that inflation is becoming increasingly generalised across commodities. In January 2026, just 22 commodities accounted for 90 per cent of the weighted contribution to CPI inflation. By August, the number had increased to 51 commodities.
The bank also noted that the contribution of the top 25 commodities, excluding gold and silver, declined sharply from 83 per cent in January 2026 to 62 per cent in August. According to SBI, the broader spread of price pressures suggests that inflation is no longer being driven by a narrow set of commodities.
“Going forward, we believe CPI inflation may cross-6.5 per cent mark before dropping to less than 6 per cent in the early 2027,” SBI said, adding that the October and December MPC meetings could be a “perfect pitch” for nuanced rate hike calls of 25 basis points each, followed by a pause to assess incoming data.
The inflation outlook is also being complicated by developments in global energy markets. SBI said the ongoing West Asia conflict, which has gained both depth and breadth, could keep crude oil prices above $100 per barrel in the near term, while also increasing price volatility.
