Loftus-Cheek was struggling to get in the Chelsea team at the start of the campaign, but made four appearances in October and is impressing Sarri with his form.
The manager told the London Evening Standard: “Ruben in October played four matches out of five. I think at the moment the situation is not for a loan of course."
Sarri added: "He has improved, but he needs to improve more from the tactical point of view.
"The rest is good: he has great physical characteristics, he is fast, solid, he has impact, great characteristics.
"Technically he is very good and I think if he wants to play like a midfielder he has to improve in the defensive phase. But the potential is great."