MUMBAI - INDIA'S central bank is expected to keep interest rates unchanged on Tuesday, opting to support a nascent economic recovery instead of tackling rising prices, economists said.

The inflation rate accelerated to more than one percent for the week ended October 10, official data showed last Thursday, fuelling speculation the bank may act to curb mounting price pressures.

Higher prices caused by increasing food costs after a poor monsoon, along with the fragile economic recovery, has confronted the central bank with a dilemma about when to take the first steps to tighten monetary policy.

'The RBI (Reserve Bank of India) has been reiterating its priority to support growth despite brewing domestic inflationary pressures,' said Siddhartha Sanyal, economist with Edelweiss Securities.

'It will abstain from hiking rates and will continue to pursue accommodative policy rates for the rest of the year while gradually chalking out a path towards a likely exit' from expansionary measures,' Mr Sanyal added.

Some economists believe there is a chance the bank might opt to drain some liquidity from the banking system as a first step to tame inflation by hiking the cash reserve ratio - the percentage of funds banks must hold in reserve. -- AFP