Inflation on the march again; RBI likely to hike rates
15 Mar 2011
The wholesale price index (WPI), the government's main measure of inflation, unexpectedly rose for February, creating pressure on the Reserve Bank of India to raise rates for the eighth time this year. The RBI's monetary review is due on Thursday; and the central bank generally uses this as a tool for adjusting key rates.
The WPI for February rose to 8.31 per cent from 8.23 per cent in January, the commerce ministry said in a statement from New Delhi today. The median forecast of 20 economists in a Bloomberg News survey was for a 7.8 per cent increase.
While the fall in fruit and vegetable prices led to a sharp decline in inflation on primary articles inflation - to 14.79 per cent from 17.28 per cent a month ago - manufacturing products inflation rose to 4.94 per cent against 3.75 per cent in January.
Rising crude prices translated into higher fuel inflation and the fuel group inflation inched up to 11.49 per cent from 11.41 per cent.
The Reserve Bank of India may increase its repurchase rate by a quarter-point on Thursday, according to all 19 economists in the Bloomberg survey, after weighing the impact of oil prices and the earthquake in Japan. India's benchmark price gauge is almost double the central bank's ''tolerance'' level.
''By no measure is the inflation rate heading back to a comfortable level any time too soon,'' Vishnu Varathan, a Singapore-based economist at Capital Economics (Asia) Pte, said before the release of the data. He expects the central bank to raise rates by 25 basis points this week.
