The State Bank of India (SBI) has called for two successive 25-basis-point interest rate hikes at the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) meetings in October and December 2026, warning that inflation is becoming increasingly broad-based across the Indian economy. The recommendation, contained in SBI's latest Ecowrap research report released on Tuesday, 15 September 2026, comes as retail inflation accelerated to 4.82 per cent in August 2026, up from 4.45 per cent in July.

Inflation Broadening Across Commodities

SBI's analysis of Consumer Price Index (CPI) data reveals that price pressures are no longer confined to a narrow cluster of goods. In January 2026, just 22 commodities accounted for 90 per cent of the weighted contribution to CPI inflation. By August 2026, that number had risen to 51 commodities — a near-doubling in the breadth of inflation drivers within eight months.

Reinforcing this, the contribution of the top 25 commodities (excluding gold and silver) fell sharply from 83 per cent in January to 62 per cent in August. According to SBI, this indicates that inflation is being shared across a far wider basket, making targeted supply-side interventions less effective as a standalone policy tool.

Food and Core Inflation Both Rising

Food inflation climbed to 5.66 per cent in August, driven by elevated prices of select items including onions, ginger, and garlic. Rural inflation remained notably higher at 5.23 per cent against 4.31 per cent in urban areas, pointing to persistent supply-chain and agricultural stress in non-metro regions.

Equally concerning for policymakers, core inflation — which strips out food, fuel, household, and transport components — rose to 4.16 per cent in August from 3.87 per cent in July. A rising core reading typically signals that demand-side pressures are building, giving the RBI stronger justification for monetary tightening beyond a supply-shock response.

SBI's Rate Hike Forecast and the MPC 'Pitch'

SBI characterised the upcoming October and December MPC meetings as a 'perfect pitch' for nuanced rate hike decisions of 25 basis points each, to be followed by a pause while the committee assesses incoming data. The bank projected that CPI inflation could cross the 6.5 per cent mark before easing to below 6 per cent in early 2027. This would push headline inflation well above the RBI's upper tolerance band of 6 per cent, strengthening the case for pre-emptive tightening.

Notably, this marks a shift in the inflation narrative — earlier in 2026, price pressures were largely attributed to seasonal food volatility. The sustained rise in core inflation alongside broader commodity-level spread signals a more structural challenge for the central bank.

West Asia Conflict Adds Global Risk Layer

The inflation outlook faces additional headwinds from the global energy market. SBI flagged the ongoing West Asia conflict — which it noted has gained both depth and breadth — as a key upside risk to crude oil prices, potentially pushing them above $100 per barrel in the near term. India, which imports over 85 per cent of its crude oil requirements, remains particularly exposed to an energy price spike, which would feed directly into fuel, logistics, and manufacturing costs across the economy.

With the next MPC meeting approaching, all eyes will be on the RBI's response to SBI's warning — and whether the central bank opts to move proactively or wait for further data before adjusting its rate stance.