Mumbai: Double-digit inflation in the country will continue for a few more months before coming down to around 8.5 per cent by the year-end, and may pull back to the 5 per cent levels by the middle of next year, economists and analysts have said.

Reports quoting finance ministry sources, meanwhile, said double-digit inflation in the country is likely to continue for some more weeks even if prices stabilise now.

Credit rating agency Moody's, meanwhile, said India's inflation rate would ease to around 8.5 per cent by the year-end due to monetary tightening and duty cuts.

"Softening demand-driven inflationary pressures will see wholesale price growth gradually decelerate to around 8.5 per cent by year-end," Moody's said in a report.

The government and the Reserve Bank do not expect the high interest rates to hurt growth as real interest in times of inflation too remain low, at least for the short run.

The rates would start going up now, albeit gradually. By this time next year, inflation would come down to 5-6 per cent, The Economic Times quoted chief economic advisor in the finance ministry Arvind Virmani as saying.

He expects real interest rates to remain low for some part of the next one year also.

Inflation for the week ended 14 June hit a new 13-year high at 11.42 per cent. The double-digit inflation rate comes on a low base of 4.13 per cent in the corresponding week a year ago. A low base of inflation, makes the present rate of price rise look larger.

That also means that even if the rate of inflation comes down, there won't be any respite from high prices. Only the rise in prices hence will be at a much slower pace.

Reserve Bank governor YV Reddy attributes the hike in inflation to some underlying factors rather than oil price spike alone.

Addressing the the 5th convocation function of the National Institute of Bank Management in Pune, he said there are also the evening effects of high global commodity prices.

While the pass-through effect of high oil prices is not happening on a continuous basis, oil price rise is a problem for both developed and developing countries, Reddy said.

Economies as a whole would be better off adjusting to the possible new reality of high and volatile energy prices, he said.

Reddy said the Indian economy is safe in regard to the financial sector and the outlook is optimistic on the food front. But, fuel prices remain the main problem. 

Finance minister P Chidambaram also expects the RBI's monetary tightening o help tame inflation.

Moody's also expect the RBI's aggressive monetary policy to help cool domestic demand, which has been partly fuelled by robust credit growth.