State Bank of India Halves December RBI Rate Hike Forecast

The State Bank of India (SBI) has halved its forecast for the Reserve Bank of India's December rate hike, now expecting a 25 basis point increase instead of the previously projected 50 basis points. This revision occurs as retail inflation hit a two-year high of 6.09% in October, breaching the central bank's upper tolerance limit of 6%.

SBI attributes the more measured outlook to improved external conditions, including a recovery of the rupee below ₹94 against the US dollar and an 11% decline in Brent crude prices following US elections. The bank also noted foreign institutional investment inflows of approximately $7.65 billion to $7.68 billion since early November. Consequently, SBI now assigns a 50% probability that the terminal repo rate will settle at 5.75% rather than 6%, suggesting the December move could be the final hike in the current cycle.

Broader economic data indicates persistent price pressures, with food and beverages recording 8.51% inflation and 11 of 12 major Consumer Price Index categories showing increases. While most analysts and agencies like CareEdge Ratings now forecast a 25-basis-point hike, some predict cumulative increases of up to 50 basis points through early 2027. The Reserve Bank of India projects headline inflation to eventually settle at 5.2% for the 2026-27 financial year.