By Manoj Kumar

NEW DELHI, (Reuters) – India’s retail inflation accelerated last November due to an increase in food prices. However, it remained within the medium term target of the central banks, strengthening expectations that they could hold interest rates at their next meeting in February.

According to Ministry of Statistics, November’s consumer prices increased by 4.91% compared with October’s 4.48%. However, this was slower than expected based on the consensus Reuters poll of 5.10%.

Last week, the Reserve Bank of India kept interest rates at their current levels. It stated that growth is a priority and warned of inflationary risks.

India’s economy grew by 8.4% in September from last year, which is the fastest growth rate among major economies. However, economists believe that India’s pandemic situation remains an unknown quantity.

Inflation is expected to be 5.1% in October-December and 5.7% in January-March quarters of the current financial year, according to the central bank.

In November, food prices, which account for almost half of the consumer price indicator (CPI), rose 1.87% annually compared with 0.85% in the month prior. Vegetable prices declined by 13.6%, but edible oil prices rose almost 30% over the same period a year ago.

Recent months have seen inflation stay within RBI’s target range of 2-6%. A cut by the federal government in the fuel tax and the softening global prices have lowered inflationary pressures.

However, economists warn of the possibility of an increase in inflation headlines over the next months, as businesses pass higher input costs on to consumers during economic recovery.

Shilan Shah (India economist, Capital Economics) stated that “CPI inflation will rise further in the coming months” and that the risk is stacked in the upside.

He said that any increase in inflation would not trigger tightening of the central banks’ monetary policy.

The data revealed that retail fuel prices increased 13.35% in November compared with 14.35% the month before.

Three economists estimated that November’s annual core inflation was between 6.8% and 6.2%, which excludes volatile food and energy prices. This compares to 6% to 6.1% the month before.

The core inflation number is not published by the government.