Inflation seen at 11.98 pct on Sept 27

In early August, the inflation rate was 12.63 per cent, the highest reading since annual numbers in the current data series became available in April 1995. It jumped into double digits after a hike in retail fuel rates in June.

Analysts said inflation has probably already peaked, and may now embark on a downtrend, but the base effect was likely to play a key role in the next few weeks.

“We are likely to see a lower fuel price index and even the primary articles are expected to decline, so we expect inflation one tick lower at 11.98,” said Shubhada Rao, chief economist at Yes Bank.

The data is due around 6 p.m. on Friday. It is normally released on Thursday, but financial markets will be closed for a religious holiday on Oct. 9.

Last month, central bank governor Duvvuri Subbarao said inflation was showing signs of moderating but it was too early to conclude whether this was a trend.

A senior finance ministry official saidon Wednesday the rate was unlikely to fall below 10 per cent in 2008, while the deputy head of the government’s planning commission said it would fall to single digits “in a couple of months”.

The government earlier said inflation would hit 13 per cent and start moderating from December, before settling at 8.0-9.0 per cent by the end of the fiscal year in March.

A sharp depreciation in the local currency is likely to pressure inflation expectations, analysts added, as the cost of imports rises. The Indian rupee has fallen more than 19 per cent against the dollar so far in 2008.

But a steep fall in global crude prices to around $87 per barrel from a July record above $147 may offset some of the impact as imported oil becomes cheaper.

The wholesale price index is more closely watched than the consumer price index (CPI) because it includes more products and is also published weekly. The CPI is released monthly.