In its macroeconomic and monetary development report released ahead of the review on January 31, the RBI warned of inflationary pressures in the economy, implying a possible hike in interest rates.

The central bank said the prices of primary food articles and manufactured products posed upward pressure on inflation which was 6 per cent by mid-January as compared to 4.1 per cent in end-March, 2006.

"Pre-emptive monetary and fiscal measures along with moderation in fuel prices could have helped in containing inflationary expectations, although underlying inflationary pressures remain," it said.

"The year-on-year inflation, excluding the fuel group at 6.6 per cent was above the headline inflation rate of 6 per cent as on January 13, 2007," the apex bank stated.

Among the major groups, wheat prices increased by 14.7 per cent as on January 13, 2007, pulses increased by 25.4 per cent while fruit and milk prices by 12 per cent and 7.6 per cent, respectively, the RBI stated.

"Overall, the prices of primary articles have increased by 10.3 per cent since March-end 2006," the RBI said.