Inflation leaps; rate cuts a remote possibility

February inflation surprised on the higher side today and came in at 6.95%, way above the market expectation of 6.75%. Inflation data was expected slightly higher than the January figure of 6.56% and the February inflation will now make it difficult for the RBI to cut repo rate.

RBI will now take into account the inflation number before its Monetary Policy Review meeting on March 15, 2012 to decide on repo rate cuts.

Inflation is a major variable for the RBI in deciding on repo rate cuts and with the inflation rate coming higher, it is unlikely that the RBI will cut rates on Thursday. Earlier when inflation in the economy was high, the RBI hiked rates 13 times between March 2010 and October 2011.

The RBI has already cut the CRR on March 9, ahead of the Monetary Policy Review meeting. It's interesting to see what India's Central Bank would do tomorrow.

Feb WPI non food index was up 2.1%, while the Feb WPI Food Group Index was up 0.5%.

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