``Wholesale inflation rate is expected to remain in the range of 7-9 per cent as high money supply has provided the fuel for sustaining the rise in prices,'' JM Finance said in its latest money market update.

Inflation has reached the second highest level to 8.69 per cent for the week ending September 26 compared with a record low of 3.47 per cent during the same period last year.

It feels current easy liquidity monetary conditions (money supply growth of 19.4 per cent on annualised basis)) will impact inflation with a lag in second half of current year.

It said cost push factors like rise in prices of agriculture raw materials and higher wage goods prices have also been responsible for the recent rise in prices.

There has been highergrowth in money supply (M3), ranging between 17-20 per cent against the target of 15-15.5 per cent, as Reserve Bank of India (RBI) is taking huge development of government paper.

``High monetary growth had translated into asset inflation with bond and stock prices at a new high, which has translated into commodity price inflation in the current year,'' it said.

According to JM Financial Wholesale Price Index (WPI) has risen by 5.2 per cent in the current fiscal which on annualised terms is 10.7 per cent. While the Consumer Price Index of industrial workers has risen at a faster rate to 14.8 per cent in July this year.

It feels that higher inflationary expectations will keep upward pressure on interest rates in the second half of the current fiscal.

On forex markets, JM Financial says the Indian rupee is likely to remain stable against the US dollar in the near term.

RBI's comfortable reserves at $26.3 billion (September 25), checks on speculative activity of banks and corporates and recent pick-upin exports will keep the rupee stable, it said.

However JM Financial says the current capital account inflows continues to remain a concern as foreign institutional investors (FIIs) selling and lower foreign direct investment (FDI) flows will continue to affect the dollar supply.

On call money markets, where money is borrowed for fortnight by banks, it said, call rates are likely to remain firm at 8 per cent as banks cover their fortnightly exposures in the first week due to lesser trading days in the second week.