India inflation in double digits for weeks-official

NEW DELHI, June 25 (Reuters) - India's headline inflation rate, which hit a 13-year high above 11 percent in early June, will stay in double digits for some weeks and it is difficult to predict when it will peak, a senior finance ministry official said on Wednesday.

"There is a lot uncertainty on what will happen to oil prices. We will see inflation staying at double digits for some weeks because of a low base last year," the official, who did not wish to be identified, told Reuters.

"But the pace of price increases will slow," he added.

He said the Reserve Bank of India's (RBI) move to increase its main lending rate by 50 basis points to 8.5 percent with immediate effect late on Tuesday was "decisive".

But authorities would have to adopt a "wait and watch" policy to see if more rate increases were needed.

The RBI also hiked banks' reserve requirements by 50 basis points, with the increase taking place in two stages in July.

The official said that despite the inflation fighting measures, India's growth prospects remained strong and investment demand had not eased.

"Growth will be a minimum 8.5 percent, plus/minus 0.5 percentage point, for 2008/09," the official said, a prediction in line with earlier official forecasts. (Reporting by Surojit Gupta and Rajkumar Ray; Editing by Mark Williams)