Inflation rises further to 4.27 percent

India's inflation unexpectedly accelerated in the last week of June as prices of cereals, pulses and other food products rose. The index of food articles rose 0.7 percent in the week to June 30, compared with a 0.3 percent gain in the index of manufactured products. The wholesale price index rose 4.27 percent in the week to June 30 from a year earlier, compared with 4.13 percent in the previous week. The government revised the inflation rate for the week ended May 5 to 5.74 percent from 5.44 percent. The government revises the inflation rate after a delay of two months on additional price data.

Prices of manufactured goods rose at half the pace of food costs, increasing optimism the central bank may refrain from lifting interest rates this month. Farm prices may decline as the government this month awarded contracts to import more wheat and as farmers planted oilseed and other crops in a larger area this year, boosting supplies. ''Food prices will come off after monsoon crops arrive and increase supplies,'' said Mini Uboveja, an economist at STCI Primary Dealer Ltd. in Mumbai. ''Raising interest rates won't help in checking food prices.''

Reserve Bank of India Governor Yaga Venugopal Reddy will set interest rates in his next monetary policy statement on July 31. Reddy has raised the central bank's key repurchase rate, or the overnight lending rate, six times in the past 1 1/2 years to slow loans and contain manufactured product prices. The Reserve Bank has allowed to rupee to surge to near a nine-year high to make imports cheaper and contain inflation. The central bank has slowed dollar purchases on concern that rupee funds injected from intervention will stoke inflation. The rupee fell 0.1 percent to 40.48 per dollar this week as of 1:15 p.m. in Mumbai, according to data compiled by Bloomberg. The currency has gained 9.4 percent this year, more than five times its advance in 2006.