India's inflation accelerated to the fastest pace in more than 16 years, increasing the likelihood the central bank will raise interest rates for a fourth time since June, Bloomberg reported.
Wholesale prices rose 12.63 per cent in the week to August 9, after increasing 12.44 per cent in the previous week, the commerce ministry said in New Delhi. That matched the median forecast in a Bloomberg News survey.
Inflation may climb higher after Prime Minister Manmohan Singh's cabinet last week approved an average 21 per cent pay rise for 5 million civil servants, ahead of elections due by May. That may prompt the Reserve Bank of India to add to three rate increases since June, economists said.
"The whole objective of monetary policy at this point in time, which is to contain and manage demand, is going to face some hurdles," said Shubhada Rao, an economist with Mumbai-based Yes Bank. "The pay revision is clearly going to add to demand pressures on inflation."