India Wholesale Prices and Fx Reserves 19 January 2008

India's wholesale inflation unexpectedly accelerated to a five-month high in the middle of January, vindicating the central bank's decision this week to refrain from cutting interest rates. Wholesale prices rose 3.93 percent in the week ended Jan. 19 from a year earlier, faster than the previous week's 3.83 percent, the Ministry of Commerce and Industry said today in New Delhi.



India's central bank in its Jan. 29 monetary policy announcement left the repurchase rate unchanged at 7.75 percent, maintained the reverse repurchase rate at 6 percent, and held its cash reserve ratio at 7.5 percent. The Reserve Bank may come under renewed pressure after the U.S. Federal Reserve cut the benchmark interest rate by half a percentage point to 3 percent on Jan. 30, the second cut in nine days, to avert a recession in the world's largest economy. Certainly, going by the foreign exchange reserves data capital inflows to India continue at a nifty pace, and they rose from 284.8 billion dollars to 288.3 billion dollars in the week ending 25th January 2008.