• Rise in line with increase in consumer price inflation
  • Price pressures could push central bank to hold rates

India’s wholesale prices unexpectedly rose for the first time since October 2014, mirroring a hardening in consumer inflation that could prompt central bank Governor Raghuram Rajan to refrain from further cuts in interest rates.

Wholesale prices rose 0.34 percent in April from a year earlier after an 0.85 percent decrease the previous month, the Commerce Ministry said in a statement on Monday. The median of 29 estimates in a Bloomberg survey of economists had predicted a 0.23 percent decline. Consumer-price inflation accelerated to 5.39 percent from 4.83 percent in March, a separate report showed last week.

Wholesale inflation "will accelerate further over the coming months" as the effect of lower oil prices fades, Shilan Shah, Singapore-based economist at Capital Economics Ltd., wrote in a report after the data. "Given also that the RBI faces a tough challenge in meeting its medium-term CPI inflation targets, the scope for further policy loosening looks limited."

Rajan, who has cut rates five times since January 2015, is looking to keep consumer inflation within 5 percent by March 2017. Monday’s data follows a weather office prediction of a delay in monsoon rains, which are being watched by the central bank as they are a crucial determinant in food costs.

Food prices rose 4.23 percent in April from a year earlier, data showed. Manufactured product prices were up 0.71 percent while fuel and power dropped 4.83 percent.

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