India’s inflation rate hit its highest level in seven years at the end of May, prompting speculation that the central bank would be forced to increase interest rates for the second time in a matter of weeks to contain soaring prices.

In a surprise increase, inflation jumped to an annual rate of 8.75 per cent on May 31, up from 8.24 per cent a week earlier, with economists warning it was likely to breach 10 per cent in figures to be released next week that will reflect fuel price rises at the start of June.