Bloomberg: India’s inflation held below the year-end target for the eighth month as the government capped retail fuel prices, making it more likely the central bank will maintain interest rates at a five-and-a-half year high.
Wholesale prices rose 3.83% in the week ended 12 January from a year earlier, faster than the previous week’s 3.79%, the ministry of commerce and industry said in New Delhi. Analysts had forecast inflation at 3.87%.
The central bank, which wants to keep inflation below 5%, meets on 29 January to review rates. The Reserve Bank of India has raised its benchmark interest rate nine times since October 2004 to help tame prices and has succeeded in dragging down inflation from a two-year high reached in January 2007.
“I think the bank will come out with a policy at the end of this month that will contain inflation as well as ensure that the growth process doesn’t suffer,” finance minister P. Chidambaram said in an interview at the World Economic Forum in Davos.
RBI may come under pressure after the US Federal Reserve cut the target overnight lending rate on 22 January by three quarters of a percentage point to 3.5% to avert a recession in the world’s largest economy. Chidambaram on Thursday said the unexpected cut in the US interest rates may increase capital flows to India and the central bank would have to respond appropriately to tackle inflows.
India on Friday revised the inflation rate for the week ended 17 November to 3.35% from 3.21%. The government revises the inflation rate after a delay of two months on additional price data.