WPI falls again, rates unlikely to change

By Rajkumar Ray

NEW DELHI (Reuters) - India's wholesale price index remained negative at the end of June, but with prices rising on a weekly basis and the impact of a fuel price hike still to be seen analysts said the central bank would keep interest rates steady.

The widely watched wholesale price index fell 1.55 percent in the 12 months to June 27, compared with a 1.3 percent fall of previous week and a market forecast of a 1.47 percent fall.

The negative readings reflect a sharp acceleration in prices last year rather than deflation -- the WPI has been rising since March as price pressures build -- and had been expected by analysts and policy makers.

"Headline inflation continues to conceal the underlying inflationary pressures," said Gaurav Kapur, senior economist at ABN Amro Bank.

"The recent fuel price hike would add to these pressures and once the high base effect is out of the way, largely by mid-August, the headline WPI inflation will start reflecting a much more fair picture of inflationary situation in the economy."

The 5-year bond yield was unchanged at 6.34 percent after the data release but rose 2 basis point by 0745 GMT, while the benchmark stock index recovered half a percent but gave up gains and stood at 13,811 at 0852 GMT.

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