Indian inflation above 4%

Indian inflation breached 4 per cent in late January, its highest in nearly five months, and analysts said the upswing meant the central bank was unlikely to loosen its grip on rates anytime soon despite slowing growth.

The wholesale price index rose 4.11 per cent in the 12 months to Jan 26, higher than the previous week's rate of 3.93 per cent and above a median forecast of 3.97 per cent in a Reuters poll of analysts, data showed on Friday.

Inflation is still below the central bank's comfort level of 5 per cent but it is expected to head up further in the weeks ahead with high food and fuel prices at home and in global markets posing a risk.

'Inflation is coming back to where it was initially expected to be. We maintain the view that inflation should be between 4.0-4.5 per cent by the end of the financial year,' said Shuchita Mehta, chief India economist at Standard Chartered Bank.

'We still remain concerned over high agri-commodity prices as well as local crude oil prices which might keep the central bank on hold for an extended period of time despite weakness on the global economic front.'

India's statistics office said on Thursday 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.

Markets showed little reaction to the data with the rupee at 39.55/56 per dollar, a touch lower than 39.54/55 ahead of the release of the data, and the 10-year federal bond unchanged at 7.46 per cent.