SBI Research expects retail inflation to rise to 4.7% in August and potentially breach the 6% mark in October-November before easing to around 5% in the fourth quarter of FY27, citing improving food supply conditions and seasonal trends.
India’s retail inflation could briefly cross the 6 per cent mark in October and November before moderating to around 5 per cent in the fourth quarter of FY27, according to a report by SBI Research.
The report expects retail inflation to rise to 4.7 per cent in August, from 4.45 per cent in July. “We expect August inflation print at 4.7 per cent, with inflation possibly just breaching 6 per cent in October and November before declining to ~5 per cent in Q4 of FY27,” SBI Research said.
The report noted that improving food supply conditions could help contain inflation in the months ahead. The monsoon has also recovered after a weak start, with surplus rainfall in July and normal rainfall in August helping narrow the overall rainfall deficit to around 13 per cent, from nearly 40 per cent in June.
SBI Research said a positive Indian Ocean Dipole could partly offset the impact of El Nino. Meanwhile, kharif sowing is only around 2 per cent below last season despite below-normal rainfall in some major foodgrain-producing states, indicating improved irrigation facilities across states.
Historical trends also suggest that inflation in the fourth quarter could turn out to be lower than current forecasts, the report said.
RBI policy outlook
The inflation outlook will remain important for the Reserve Bank of India as it assesses the future course of monetary policy. RBI Governor Sanjay Malhotra has indicated that the central bank needs greater clarity on the inflation trajectory before recalibrating policy rates.
More from BusinessMinutes of the latest Monetary Policy Committee meeting showed that Malhotra viewed inflation as normalising from earlier benign levels and preferred to wait for more evidence before deciding on the next policy move.
SBI Research also flagged concerns over central bank communication, arguing that recent policy actions could carry greater weight than forward guidance. It cited measures such as variable rate reverse repo operations and the FCNR(B) deposit mobilisation window.
Global market implications
The report also highlighted developments in US Treasury markets, noting that Federal Reserve measures aimed at smoothing the long end of the Treasury yield curve, including increased government debt repurchases, could have implications for global markets.
Longer-maturity Treasury yields, including the benchmark 10-year segment, have declined amid expectations of a shift in government debt supply between short- and long-term maturities.
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