SBI flags rate cut delay on inflation uptick

As August inflation is expected to edge above 2 per cent — potentially reaching around 2.3 per cent — the likelihood of a Reserve Bank of India (RBI) rate cut in October appears slim, according to SBI Research. The report also cautioned that even a December rate cut could prove difficult if first and second quarter growth figures are factored in.

India’s Consumer Price Index (CPI) inflation eased to a 98-month low of 1.55 per cent in July, down from 2.10 per cent in June and 3.60 per cent in July 2024. This marks the ninth consecutive month of decline, driven largely by a drop in food inflation, which has now fallen to a 78-month low.

Food inflation fell by 75 basis points in July compared to June 2025, recording its lowest level since January 2019 at –1.76 per cent, against –2.24 per cent back then. Core inflation also dropped sharply, slipping below 4 per cent for the first time in six months to 3.94 per cent. When gold prices are excluded, core inflation slid further to 2.96 per cent — almost 100 basis points lower than the headline core CPI.

In Q1 FY26, around 2,500 listed Indian companies reported topline growth of 5.4 per cent, with EBITDA rising about 6 per cent. However, SBI Research warned that Q2 could bring revenue and margin pressures for export-oriented, tariff-affected sectors such as textiles, gems and jewellery, leather, chemicals, agriculture, and auto components.

 

ALSO READ: https://www.benefitnews24.com/economy/india-outpaces-us-in-global-growth-share-rbi-chief/17500

Internationally, US CPI inflation (not seasonally adjusted) grew 2.7 per cent year-on-year in July — 40 basis points higher than April — signalling tariff-related pressures.

Since the RBI’s rate cut in June and its decision to hold rates in August, India’s 10-year bond yield has been rising, moving from around 6.30 per cent in July to above 6.45 per cent. The SBI report noted that yields are unlikely to ease without clarity on tariffs.

It also described the yield curve as a “public good” in the Indian market, where debt market participants often act either pro-cyclically or counter-cyclically to the RBI’s monetary stance. The report observed that post-June policy, almost all players have been selling in unison — a trend it termed “surprising”, leading to skewed price discovery despite inflation being at its lowest in eight years.

[Except for the headline, this article has not been edited by the Benefit News editorial team and is published directly from the IANS news feed]