RBI Repo Rate Hike: The Reserve Bank of India may need to turn to monetary policy to deal with growing external economic pressures, according to a new assessment by SBI Research. The research arm of the State Bank of India has recommended that the RBI Monetary Policy Committee (MPC) raise the repo rate by 25 basis points in both October and December 2026.
The recommendation comes at a time when international developments, particularly the sharp rise in crude oil prices, are creating fresh concerns over inflation and economic growth.
The RBI’s next monetary policy meeting is scheduled for October 5-7, 2026, when the MPC will review interest rates and assess the latest economic conditions.
SBI Research Recommends Two Repo Rate Hikes
SBI Research has urged the central bank to consider a 25 basis point repo rate increase in the October policy meeting, followed by another hike of the same size in December.
According to the research note, the recommendation is based on several evolving risks facing the Indian economy. SBI Research has indicated that its rate-hike call is not dependent on the August Consumer Price Index (CPI) inflation figure, which it expects could be around 4.8-4.9%.
The report warns that if crude oil prices remain elevated, inflation could rise considerably in the following months. It estimates that October and November inflation could move towards 6.5% or even higher if oil prices stay at elevated levels.
Current RBI Repo Rate Stands at 5.25%
The RBI repo rate currently stands at 5.25%. A rate increase would make borrowing more expensive for banks and could eventually influence lending rates across the economy.
Market participants are also closely watching the US Federal Reserve. There is growing speculation that the US Fed could increase its policy rate by 25 basis points this month, adding another external factor for policymakers to consider.
West Asia Tensions Put Crude Oil Prices in Focus
One of the biggest concerns highlighted by SBI Research is the impact of rising crude oil prices.
For an economy such as India, which depends significantly on imported energy, a sustained increase in oil prices can have wide-ranging consequences. More expensive crude can push up transportation and production costs, increase inflationary pressure and affect government finances, businesses and household spending.
SBI Research has pointed out that crude oil has already crossed the $100-per-barrel level, with geopolitical uncertainty adding to the volatility in global energy markets.
Rising Input Costs Could Push Consumer Inflation Higher
Another concern raised in the report is the growing gap between input costs and output prices across several sectors.
When the cost of raw materials and other inputs rises faster than the prices charged for finished products, businesses may initially absorb part of the increase. However, if the pressure continues, companies may eventually pass those higher costs on to consumers.
SBI Research has identified sectors including crude petroleum and natural gas, beverages, pharmaceuticals and electronics as areas where such pressures are becoming noticeable.
The report also highlighted the possibility of crude oil prices moving significantly higher. Based on its quantile regression analysis, SBI Research said that at the 60th quantile, crude prices could potentially reach around $123 per barrel over the following 15 days.
Why Crude Oil Could Become a Major Inflation Risk
The potential pass-through from higher crude prices to consumer prices is particularly important for India.
According to SBI Research, 31.3% of the crude petroleum and natural gas sector’s share is imported, making it especially vulnerable to movements in global oil prices.
If producers are unable to fully absorb rising input expenses, higher costs could gradually reach consumers. This could result in broader inflationary pressure and strengthen the case for tighter monetary policy.
The research therefore sees a potential need for a rate hike in October, followed by another increase in December.
Trump Says Oil Prices May Stay High
Global oil market expectations are also being influenced by political developments in the United States.
Former US President Donald Trump has indicated that crude oil prices are unlikely to fall significantly before the US midterm elections in November.
Meanwhile, some global financial institutions have warned that crude could rise further amid geopolitical risks. Forecasts have included prices reaching $120 per barrel, while a more severe scenario could see oil moving towards $150 per barrel.
What Could Happen to the RBI Repo Rate Next?
The RBI will have to balance inflation risks against economic growth while considering its next policy decision. A sustained rise in crude oil prices could make the inflation outlook more challenging, particularly if higher energy costs begin spreading through other sectors.
SBI Research’s recommendation is for the RBI to deliver two consecutive 25 basis point repo rate hikes — one in October and another in December 2026.
For now, the focus will remain on the upcoming RBI MPC meeting from October 5 to 7, along with crude oil prices, domestic inflation data and global central-bank decisions.
If oil prices continue to remain above the $100-per-barrel mark, the inflation outlook could become a key factor shaping the RBI’s interest-rate strategy in the months ahead.