Mumbai, March 31: Standard Chartered Bank, the largest foreign bank operating in India, today forecast that inflation could average above 6.5 per cent in 2008-09 against its current expectations of 5.7 per cent.

The higher forecast indicates that Stanchart doesn’t expect that the finance ministry or the Reserve Bank of India will be able to trim inflation – a factor that will almost certainly weigh on the minds of voters at next year’s general elections.

The bank warned that the current surge in inflation, which is supply led, can very quickly translate into second round effects which could become unmanageable.

It forecast that the Reserve Bank of India (RBI) will raise the cash reserve ratio (CRR) by 50 basis points and allow the rupee to appreciate in a bid to slam the lid on inflation.

The bank also expected the government to come out with other measures including changes in excise duties, import duties and an increase in subsidies (issuance of oil bonds to oil companies) to ease off the price burden from the economy.