Interest Rate Cut Unlikely in October as Inflation Expected to Rise, Says SBI Report

Despite a record low of 1.55% in July, a new State Bank of India report predicts a rise in August inflation, making a rate cut by the Reserve Bank of India a “difficult” proposition in the near term.

New Delhi, India – August 13, 2025: The relief from India’s record-low retail inflation may be short-lived, according to a new report from the State Bank of India (SBI). Despite the country’s Consumer Price Index (CPI) easing to a stunning 98-month low of 1.55% in July, the report suggests that a key interest rate cut by the Reserve Bank of India (RBI) is “unlikely” in its October policy meeting.

The SBI report predicts that inflation in August is likely to rise above 2%, potentially reaching as high as 2.3%. This projected increase, combined with the growth numbers from the first and second quarters, makes even a December rate cut “a tad difficult,” according to the report.

The central bank’s Monetary Policy Committee (MPC) last cut rates in June and has since maintained a status quo in its August meeting. In the wake of this decision, the 10-year government bond yield has been steadily rising, crossing the 6.45% mark from around 6.30% in July. The report adds that bond yields are unlikely to moderate until there is more clarity on tariffs.

July’s impressive inflation numbers, driven by a sharp drop in food inflation to a 78-month low of -1.76%, had provided some hope for a change in monetary policy. Core inflation also saw a significant deceleration, falling below 4% for the first time in six months. However, the SBI report’s forecast casts a shadow of caution over the economic outlook, suggesting that policymakers will remain focused on keeping a tight rein on inflation for the foreseeable future.