Inflation rises to 8.31% in Feb

Inflation continued to dodge policy makers as it rose to 8.31 per cent in February, from 8.23 per cent a month ago, albeit a fall in the rate of food inflation.

This may prompt the Reserve Bank of India (RBI) to further tighten its monetary stance later this week to tame inflationary expectations.

It seems prices of manufactured products would also give jitters to the policy makers, as core inflation (a technical term means when food products are taken out of the manufactured category) rose to a two-year high of 6.21 per cent in February.

Finance Minister Pranab Mukherjee hoped inflation should come down to 7 per cent by the end of this financial year. “By March-end, it would be possible to have 7-7.5 per cent (inflation),” he told reporters.

YES Bank chief economist Shubhada Rao expects RBI to increase its policy rates in phases. She also expects RBI to advance its rate hiking spree. “We believe RBI will continue with its calibrated approach but front-load its rate hikes. We rule out any large doses of rate hike but believe that three consecutive 25 basis point increases until June are a strong possibility.”