NEW DELHI — India’s main inflation rate hit a six-month high in August, driven by a surprise surge in food prices, hardening the case for the central bank’s governor, Raghuram Rajan, to keep interest rates high at his first policy meeting this week.
Food inflation accelerated to a three-year high of 18.18 percent in August, government data released on Monday showed, driving overall inflation to a higher-than-expected 6.1 percent.
Recent government moves to increase fuel prices also drove the jump in the wholesale price index, the price of a representative basket of wholesale goods.
Economists polled by Reuters had expected a headline reading of 5.8 percent, compared with 5.79 percent in July. The main, or headline, inflation rate includes food prices, which are often volatile.
Late planting and disruptions in the supplies of vegetables, including onions, because of heavy summer rains have fueled food inflation. Onion prices jumped 51 percent from July to August.
Monday’s release was the last major data point before Mr. Rajan, a former I.M.F. chief economist, holds his first policy meeting Friday.
“Developments in the currency market suggest that R.B.I. should be in a position to start reversing its tightening measures. However, they have to be careful, as market could interpret it as tolerating higher inflation,” said A. Prasanna, an economist with ICICI Securities Primary Dealership in Mumbai, referring to the central bank, the Reserve Bank of India.
The higher inflation number dampened market expectations that Mr. Rajan would begin to roll back some of the measures put in place by his predecessor in a bid to arrest a sharp decline in the rupee since May.
He has already warned he does not have a “magic wand” to deal with India’s economic crisis, but as he has been dubbed the Guv by a gushing Indian media, hopes are high he can find a formula to stabilize the rupee, calm inflationary pressure and at the same time set off a revival in economic growth.
Before he reveals his monetary stance, Mr. Rajan will first have to deal with the outcome of a pivotal meeting on Tuesday and Wednesday of the U.S. Federal Reserve. The Fed is likely to announce measures to rein in its huge economic stimulus. Fears of an expected policy tapering have already set off an emerging-market sell-off, contributing to the rupee’s fall to a record low.
The Fed is expected to reduce its $85 billion a month bond-buying program, but financial markets are uncertain about the extent of the reduction.