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India inflation rate rises more than expected | India inflation rate rises more than expected |
(about 1 hour later) | |
Indian inflation rose faster than expected in May, raising expectations of a further interest rate rise. | Indian inflation rose faster than expected in May, raising expectations of a further interest rate rise. |
The wholesale price index rose by an annual rate of 9.06%, up from the April figure of 8.66%. | The wholesale price index rose by an annual rate of 9.06%, up from the April figure of 8.66%. |
The rise was driven partly by an increase in the price of manufactured goods, with the rate of food and fuel inflation both falling. | The rise was driven partly by an increase in the price of manufactured goods, with the rate of food and fuel inflation both falling. |
The Indian central bank will announce its next decision on interest rates on Thursday. | The Indian central bank will announce its next decision on interest rates on Thursday. |
Analysts had expected a smaller rise in inflation as some global fuel and commodity costs fell in May. | Analysts had expected a smaller rise in inflation as some global fuel and commodity costs fell in May. |
Annual fuel inflation in May remained high, but fell to 12.32% from 13.32% in April. | Annual fuel inflation in May remained high, but fell to 12.32% from 13.32% in April. |
This occurred despite increases in petrol prices by Indian refiners in the middle of May. | This occurred despite increases in petrol prices by Indian refiners in the middle of May. |
But the growth in costs of manufactured goods - a key component of India's wholesale price index - accelerated to 7.27% from 6.18% in April. | But the growth in costs of manufactured goods - a key component of India's wholesale price index - accelerated to 7.27% from 6.18% in April. |
"The big surprise is mainly because of the sharp increase in manufacturing prices," said Nomura economist Sonal Varma. | "The big surprise is mainly because of the sharp increase in manufacturing prices," said Nomura economist Sonal Varma. |
It means "core" inflation, which strips out the impact of changing global commodity costs on domestic prices, may be increasing. | It means "core" inflation, which strips out the impact of changing global commodity costs on domestic prices, may be increasing. |
Food inflation eased to 8.37% in May, from 8.71% in April. | Food inflation eased to 8.37% in May, from 8.71% in April. |
Rate rise | Rate rise |
Analysts say the figures make it more likely that the Reserve Bank of India will increase rates. | Analysts say the figures make it more likely that the Reserve Bank of India will increase rates. |
"This cements the case for a 25 basis points rate hike on Thursday," added Mr Varma. | "This cements the case for a 25 basis points rate hike on Thursday," added Mr Varma. |
It would be the 10th rate increase since 2010. | It would be the 10th rate increase since 2010. |
In May, the Reserve Bank of India raised the rate at which it lends to commercial banks to 7.25% from 6.75%. | In May, the Reserve Bank of India raised the rate at which it lends to commercial banks to 7.25% from 6.75%. |
Further rate rises may be limited by concerns over economic growth. | Further rate rises may be limited by concerns over economic growth. |
The country's economy grew by 7.8% in the first quarter compared with the same period last year, according to government figures. | The country's economy grew by 7.8% in the first quarter compared with the same period last year, according to government figures. |
It was the slowest pace of growth in five quarters. | It was the slowest pace of growth in five quarters. |
For the financial year to March, the economy grew by 8.5%, which was lower than the government's forecast of 8.6%. | For the financial year to March, the economy grew by 8.5%, which was lower than the government's forecast of 8.6%. |
Inflation is a particular concern in the fast-growing economies of Asia. | |
In China, the consumer price index rose by 5.5% in May reaching a 34-month high, as food and commodity prices continued to rise. |