India’s inflation accelerated more than estimated to a 14-month high, posing a challenge for central bank Governor Raghuram Rajan’s monetary policy stance.
Consumer prices rose 5.41 percent in November from a year earlier after a 5 percent increase in October, the Statistics Ministry said in a statement in New Delhi on Monday. The median of 39 estimates in a Bloomberg News survey was for 5.3 percent. A separate gauge, which tracks wholesale prices, fell 1.99 percent.
"Inflation will be under pressure in the short term due to food prices," Sujan Hajra, a Mumbai-based economist at Anand Rathi Financial Services Ltd., said before the release. "The central bank will be sitting tight at least until the first quarter."
Rajan left one of the highest borrowing costs in major Asian economies unchanged earlier this month as risks to his inflation target of 5 percent by March 2017 increase. Emerging nations are also bracing for swings in stocks, bonds and currencies from tighter U.S. monetary policy. Rajan expects the Federal Reserve to raise interest rates by as much as a quarter point this week.
The rupee weakened 0.3 percent to 67.1 per dollar in Mumbai on Monday, while the 10-year bond yield was at 7.82 percent from 7.78 percent on Friday. The S&P BSE Sensex index rose 0.4 percent.
Inflation is expected to accelerate until December before plateauing, Rajan said on Dec. 1, adding that government measures are needed to maintain food supplies if crops suffer due to poor rainfall.
Goldman Sachs Group Inc.. Australia & New Zealand Banking Group Ltd. and Mizuho Bank Ltd. expect Rajan to keep the Reserve Bank of India’s repurchase rate at 6.75 percent throughout 2016.