Inflation in India slowed to 9.22% in July, its lowest rate in eight months, as prices eased for food and energy.
The wholesale price index — India’s main measure of inflation — was down from 9.44% in June and 9.98% in the same month a year earlier. The rate for May was revised upward to 9.56% from an initial estimate of 9.06%.
The decline, however, is unlikely to deter the Reserve Bank of India from raising interest rates again in September.
“Inflationary pressure is in the system and we shall have to take efforts to have inflationary pressure at an acceptable, moderate level for which we are working in tandem with RBI,” said Finance Minister Pranab Mukherjee, Reuters reported.
July was the eighth consecutive month that inflation remained at more than 9%. The RBI has boosted interest rates 325 basis points in 11 steps since March 2010 in an effort to cool the economy and slow price increases — but at 8%, the short-term “pro” rate is still stubbornly below the broad inflation rate.
Forecasts of India’s growth for 2011 have already been cut to 8.2% from 9% for the fiscal year ending in March by the government. The economy grew 8.5% in the previous fiscal year.
“Higher inflation readings over the next few months are more or less factored in by markets,” said Sudhakar Shanbhag, who manages $1.9 billion as chief investment officer of Mumbai- based Kotak Mahindra Old Mutual Life Insurance Ltd, Bloomberg reported. “The inflation indicators are favoring further tightening of rates.”
Investors can monitor the iShares S&P India Nifty 50 Index (INDY), which is bouncing around lows for the year, for insight into the market.