India Wholesale Prices Unexpectedly Rise First Time in 18 Monthsby
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.