RBI may need to take repo rate to 6.25 per cent, says SBI Funds Management

SBI Funds Management says the RBI may have to lift the repo rate to 6.25 per cent as retail inflation hit 5.54 per cent and price pressures persist.

SBI Funds Management has warned that the Reserve Bank of India may need to raise its benchmark repo rate to at least 6.25 per cent to keep inflation in check. In its October 2026 market outlook report released last week, the fund house argued that a real interest rate of around one per cent is warranted, which would imply another 75 basis points of tightening from the current level.

The call follows the RBI's own 25-basis-point hike earlier this month that took the repo rate to 5.50 per cent, and comes as inflation data turned uglier. Retail inflation climbed to 5.54 per cent in September from 4.83 per cent in August, while wholesale inflation accelerated to 11.39 per cent. The RBI has projected inflation at six per cent in the third quarter of FY27 and 5.7 per cent in the fourth.

SBI Funds Management cautioned that elevated crude oil prices, possible food inflation and strong domestic demand could keep inflation above the RBI's six per cent upper tolerance band for two straight quarters. The report concluded that the near-term policy path is either a hike or a hold, with rate cuts firmly off the table. The RBI's next policy meeting is scheduled for December 2 to 4, when fresh inflation data will guide any further move.