Indian inflation fell to its lowest level in eight months in mid-May, official data showed on Friday, but analysts said the central bank may need to take further action to tame price growth.
The widely tracked wholesale price index rose 5.27 percent in the 12 months to May 12, slowing from 5.44 percent a week earlier and well below a two-year high of 6.69 percent in late January.
The latest figure was the lowest since September 16 last year and was in line with market forecasts. "Pressure on interest rates, however, remains because inflation is still above the comfort zone of the Reserve Bank of India (RBI)," said D.K. Joshi, principal economist at ratings agency Crisil.
The central bank has raised interest rates five times since last June to rein in inflation and credit growth. It held its main lending rate steady at 7.75 percent at a policy review last month, but said it would act swiftly if needed. It aims to keep inflation close to 5 percent this fiscal year, and bring it down to 4.0-4.5 percent over the medium term.
"Monetary policy will continue to remain tight, but it's not an alarming enough number to provoke an immediate reaction from the RBI," ABN Amro senior economist Gaurav Kapur said. The 10-year govt bond yield eased to 8.16 percent from 8.17 percent before the data, and the partially convertible rupee was steady at 40.61/62 per dollar.
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