Last month, Reserve Bank of India (RBI) reduced the repo rate by 25 basis points or 0.25 per cent. The central bank also changed its policy stance to "neutral" from "calibrated tightening". The repo rate - which is the key interest rate at which the RBI lends short-term funds to commercial banks - currently stands at 6.25 per cent.
The RBI has maintained a medium-term goal of 4 per cent for consumer inflation, which it tracks primarily to formulate its policy. Consumer inflation - determined by Consumer Price Index (CPI) - indicates the rate of increase in consumer prices.
"Inflation reading for February is marginally higher than market expectations but it still remains within the target range of the RBI. This should still be counted as a comfortable reading and is likely to keep the room open for the central bank to cut the policy rate one more time this year," said Tushar Arora, senior economist, HDFC Bank.
In separate economic data, industrial output in January rose 1.7 per cent from a year earlier, lower than forecast, government data showed on Tuesday. A Reuters poll of economists had predicted a growth of 2 per cent for January.
January's growth was much slower than the upwardly revised 2.6 per cent year-on-year increase in December, the data showed.
(With inputs from Reuters)
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