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NEW DELHI - India's annual retail inflation eased to 6.44% in February, helped by a fall in the price of some food items, but remained above central bank targets, reinforcing expectations for a further interest rate hike at its meeting next month.
The February reading was higher than the 6.35% forecast by economists in a Reuters poll, and was above the upper band of the Reserve Bank of India's (RBI) 2%-6% target, data released by the National Statistics Office on Monday showed. Annual retail inflation was 6.52% in January. The RBI has raised its benchmark repo rate by 250 basis points since May last year. The market expects a 25 basis point hike to 6.75% in April before the bank hits pause until year end.
RBI's Monetary Policy Committee will meet from April 3-6.
Food prices, which account for nearly 40% of the CPI basket, rose 5.95% in February, compared with 6.0% in January, as edible oil and vegetable prices eased.
Indian consumers have not benefited much from a fall in international crude oil prices as the state-run oil companies have kept retail petrol and diesel prices on hold, to partly recover their earlier losses.
Fuel retail prices rose 9.90% year-on-year in February from 10.84% in the previous month, the data showed.
Excluding the volatile food and energy components, core inflation rose between 6.05% and 6.12% last month, according to three economists' estimates, compared to between 6.09% and 6.10% in January.
A Reuters poll showed retail inflation would not reach the RBI's medium-term target of 4% by the end of next year and that could force the central bank to continue its aggressive tightening cycle, hurting economic growth.
India, the world's fifth-largest economy, is expected to grow around 6.5% annually in the next financial year starting April, compared to an estimated 7% in the current financial year.
(Reporting by Aftab Ahmed and Manoj Kumar; editing by Jason Neely and Sharon Singleton)