India Inflation Unexpectedly Quickens, Curbing Rate-Cut Room

Indian inflation unexpectedly accelerated in April, crimping the central bank’s scope to bolster economic growth by extending interest-rate cuts. Stocks fell, erasing earlier gains. The benchmark wholesale-price index rose 7.23 percent from a year earlier, after climbing 6.89 percent in March, the Ministry of Commerce and Industry said in a statement in New Delhi today. The median of 32 estimates in a Bloomberg News survey was for a 6.67 percent gain. Reserve Bank of India Governor Duvvuri Subbarao signaled last month that inflation might limit the room for further cuts after he slashed the benchmark rate by half a percentage point, flagging price risks from the fiscal deficit, energy costs and a weaker rupee. Greece’s political turmoil and a deepening debt crisis in Europe are increasing pressure on Asian nations to support growth as exports falter from Taiwan to Malaysia. China cut banks’ reserve requirements on May 12 to revive demand. “The Reserve Bank of India faces somewhat of a dilemma,” Robert Prior-Wandesforde, Singapore-based director of Asian economics at Credit Suisse Group AG, said in a note after the report. “Our guess is that the chance of a June rate move has diminished.”