With prices of fuel, sugar and metal products likely to remain high, the Centre for Monitoring Indian Economy on Tuesday raised the inflation forecast for 2004-05 to 6.5 per cent from the earlier estimate of five per cent.

"We expect inflation, as measured by Wholeale Price Index, in prices of fuel group, sugar, textiles, basic metal alloys and metal products to remain high in the remaining five months of 2004-05," CMIE said in its monthly economic review in Mumbai.

The average inflation during current fiscal (2004-05) works out to 6.5 per cent as compared to 5.4 per cent in the previous fiscal, it said, adding this would also be higher than CMIE's earlier projection of five per cent for 2004-05.

Inflation was higher at 6.6 per cent in April-September 2004 as against 5.3 per cent in the same period of 2003. In the current fiscal, inflation rate has steadily moved up to 8.3 per cent in August from 4.5 per cent in April 2004, the economic think-tank said.

However, it slowed down to 7.7 per cent in September and 7.2 per cent in the first three weeks of October, it said.

The higher inflation in the current fiscal largely reflects rise in prices of fuel group and manufactured goods.