New Delhi: Inflation ticked up to 4.35 per cent in early February, a six-month high, and analysts said with the impact of higher fuel prices to come interest rate cuts anytime soon were unlikely despite slowing growth.
Official data released on Friday showed the wholesale price index in the 12 months to February 9 rose at a pace comfortably above the previous week's rate of 4.07 percent and a median forecast of 4.11 per cent in a Reuters poll of analysts.
Inflation is still below the central bank's comfort level of 5 percent but is expected to head up further in coming weeks with high food and commodity prices at home and in global markets posing a risk.
"The numbers are definitely higher than expectations and with the fuel price hike showing up in headline numbers from next week, inflation seems to be on an uptrend and may reach the 5 per cent mark very soon," said A. Prasanna, economist at ICICI Securities in Mumbai.
India raised retail prices of petrol and diesel by around 4 percent last week to cut losses at state-run oil firms, which sell fuels at below-market rates and which had been squeezed by a surge in the cost of crude.
"Inflation still remains the predominant concern given elevated commodity prices, including crude, primary products, and other commodities," said Shuchita Mehta, chief India economist at Standard Chartered Bank in Mumbai.
"Hence, expectations for rate cuts in the near-term are premature." The higher inflation number pushed the yield on the 10-year federal bond up to 7.60 percent from 7.59 percent earlier, but the partially convertible rupee remained unchanged at 39.967/977 per dollar.
The central bank raised interest rates five times in 10 months from June 2006 to tackle inflation and credit growth in Asia's third-largest economy and kept them steady last month saying inflation risks persisted.
Reserve Bank of India officials said earlier this month inflation was still high by global standards and needed to be brought down, while RBI Governor Yaga Venugopal Reddy said the "inherent logic" of January's rate decision still held ground.
India's statistics office has said the economy was expected to expand 8.7 per cent in the fiscal year ending March 2008, slower than the previous year as higher interest rates dent consumer demand.
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