New Delhi: Inflation marginally rose to 8.31 per cent for the month ended February, prompting the RBI to hike interest rates when it reviews the monetary policy later this week.

The inflation rate stood at 8.23 per cent in January this year, whereas it was 9.42 per cent in February last year.

The rise in inflation was mainly due to higher milk, edible oil, vegetables and fruit prices. In addition, high fuel prices on account of soaring international crude oil rates also contributed to inflation.

Hit by the tsunami in Japan, crude oil prices have eased to USD 99 per barrel on expectations of lower demand.
During February, food inflation for over 14 per cent of overall wholesale price index (WPI) inflation, stood at 10.65 per cent on year-on-year basis.

With inflation showing no signs of moderation, it is widely expected that the RBI may raise key policy rates by 25 basis points at its monetary policy review on March 17.

The RBI may raise key policy rates by 25 basis points to prevent food inflation from spilling over to the manufacturing sector, Crisil Chief Economist D K Joshi said.

During the month, fuel and power prices went up by 11.19 per cent, driven mainly by a 28.73 per cent rise in petrol prices and a 14.99 per cent jump in cooking gas (LPG) rates on an annual basis. On a monthly basis, prices of aviation turbine fuel rose by 7 per cent and furnace oil and petrol by 3 per cent each, while naphtha became 2 per cent more costly.

ICRA economist Aditi Nayar, too, said the RBI may go for a hike in interest rates. "We continue to expect that the RBI may increase repo and reverse repo rates by 25 basis points in the upcoming mid-quarter policy review," she said.
However, Finance Minister Pranab Mukherjee expressed hope that inflation should come down to 7 per cent by next month-end.

"By March-end, it would be possible to have around 7-7.5 per cent (inflation)," Mukherjee said in the Parliament House complex, adding that monthly fluctuations in inflation do not give a correct picture, he added.