"Based on the current and evolving growth and inflation scenario, the Reserve Bank will need to persist with its anti-inflationary stance of monetary policy," the central bank said in its mid-quarter review of credit policy.
"Domestically, inflation persists at uncomfortable levels. Moreover, the headline numbers understate the pressures because fuel prices have yet to reflect global crude prices," it said.
Non-food manufactured products inflation stood at 8.5 per cent in March. It increased from 6.3 per cent in April to 7.3 per cent in May, 2011, much above its medium-term trend of 4 per cent.
"This pattern in non-food manufactured products inflation is a matter of particular concern. Besides reflecting high commodity prices, it also suggests more generalised inflationary pressures (and that) rising wages and costs of service inputs are apparently being passed on by producers along the entire supply chain," the RBI said.
Food inflation, however, declined marginally to 8.96 per cent for the week ended June 4 from 9.01 per cent in the previous week.
Headline inflation, as measured by the wholesale price index (WPI), was 9.7 per cent in March, 8.7 per cent in April and 9.1 per cent in the following month.
The RBI said given the recent pattern, the inflation numbers for April and May are likely to be revised upward.
"Thus, the headline WPI inflation rate remains elevated, consistent with the projections made in the Annual Policy Statement of May 3," it said.
The main drivers of inflation in April-May, 2011, were non-food primary articles, fuel and non-food manufactured products.