SBI economists halve December RBI rate hike forecast to 25 bps on easing rupee pressure, foreign inflows

SBI Trims Rate Hike Call

State Bank of India has lowered its forecast for the Reserve Bank of India's next policy rate increase. The bank now expects a 25 basis point rise, half the 50 basis point hike it had projected earlier. The revision follows an improvement in external conditions and a return of foreign fund inflows. Inflation, however, is still expected to stay above 6 percent in November before it moderates.

Why It Matters For Business

For companies, the size of the next rate move feeds directly into the cost of borrowing. A smaller hike would mean a gentler rise in interest outgo on working capital, term loans and fresh credit lines. Firms with floating-rate debt would see a more contained reset than under the earlier projection. Treasury teams weighing hedging or fresh issuance may also read the changed call as a signal on where the rupee and yields are headed. The mention of renewed foreign inflows matters for entities that depend on overseas capital, whether through external commercial borrowings, foreign direct investment or portfolio flows. Still, the expectation that inflation remains above 6 percent in November suggests price pressure has not fully receded, leaving room for caution on input costs and pricing decisions.

What To Watch Next

The key markers are the actual inflation print for November, the trajectory of foreign inflows and the movement of the rupee, since these shaped the revised forecast. The RBI's own policy communication will be the decisive input, as forecasts by banks are projections and not commitments. Businesses should also track how external conditions evolve, given that the revision rests partly on that improvement. Any reversal in inflows or renewed currency pressure could shift expectations again. For now, the changed estimate points to a slower pace of tightening than previously assumed, but the inflation outlook keeps the policy path data-dependent.

Disclaimer

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