The Wholesale Price Index (WPI)-based inflation rate rose to a 27-month high in February due to a broad-based hardening of prices of fuels, food items and manufactured goods. However, diesel, which indirectly impacts prices of other items, continued to see deflation (a fall in prices), in February, albeit at a much lower rate than witnessed in the previous months.

WPI inflation surged to 4.17 per cent in February compared with 2.03 per cent in the previous month, the data released by the Ministry of Commerce and Industry showed on Monday. This, together with a three-month high retail price inflation rate, has effectively dimmed hopes for any policy rate reduction in the near term to spur economic growth. The Consumer Price Index (CPI)-based inflation rate in February, whose data was released recently, had jumped to 5.03 per cent mainly because of a sharp rise in petrol and diesel prices.

The doubling in WPI inflation to a 27-month high was fairly broad-based, reflecting the rise in commodity prices brought on by the global risk on sentiment, a hardening of crude oil and fuel prices as well as fading of the favourable base effect for food items,” said Aditi Nayar, the principal economist of ICRA Ratings. She expects a huge uptick in WPI inflation over the next three months with core and headline WPI rising to around 6 per cent in March. “We maintain our view that inflation dynamics will rule out any further rate cuts, with a status quo expected through 2021,” added Ms Nayar.