Inflation hovering below 2-year high

Annual inflation hit 6.73 per cent in early February, its highest in more than two years, and analysts said while the inflation rate should ease in coming months, price pressures were still a concern.

8220;Going forward, we expect manufacturing inflation to continue rising at a faster pace than the headline inflation. Accordingly, we expect the Reserve Bank of India RBI to maintain its tightening bias to contain inflation expectations,8221; said ICICI Securities economist A Prasanna.

The yield on the 10-year bond edged down to 7.94 from 7.95 per cent, and the partially convertible rupee was unchanged at 43.70. The Reserve Bank of India RBI, which next reviews the monetary policy on April 24, has stepped up the pace of policy tightening, which began more than two years ago, with an emphasis on draining excess cash from the banking system to stop it from fuelling inflation.

Finance minister P Chidambaram has repeatedly said the government is confident it can moderate inflation and the aim is to do so without hurting growth. The economy is expected to grow 9.2 per cent in financial year 2006-07, its fastest pace in 18 years. Analysts are worried that such a high growth achieved by the economy would tend to push the price level upwards.