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This prompted experts to forecast inflation rate to cross the double digit mark for the week ended June 7, data for which will be released next Friday. The recent hike in the prices of petroleum products will be reflected for the first time in the inflation figure during this week.
MORE BAD NEWS
WPI inflation forecasts for next week | | Agency | Forecasts
(in %) | | Crisil | 9.5 | | Axis Bank | 9.8 | | HDFC Bank | 9.8-10.2 | | Lehman Brothers | 10.0 |
Current inflation rate is the highest since January 13, 2001, when it stood at 8.84 per cent. Inflation rate for the corresponding week last year was 5.09 per cent. Large revisions in provisional inflation data also resumed this week with the government revising inflation rate for the week ended April 5 to 7.71 per cent, compared with 7.14 per cent as reported earlier. |
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| Finance Minister P Chidambaram termed the inflation as a "worrying" factor but said the government was confident of bringing down the price rise. |
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| However, more worrying for the government is the fact that the latest surge in inflation is largely driven by higher prices of food items and manufactured products. |
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| "Certainly, the latest inflation rate is higher than expected. With the kind of momentum that we have seen in the WPI number, there is a 60 per cent chance of inflation crossing the double-digit mark for the data released next week," said Abheek Barua, chief economist, HDFC Bank. |
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| "Inflation rate will be close to 10 per cent next week. However, this is only a conservative estimate," said Axis Bank Vice-President Saugata Bhattacharya. |
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| Apart from the fuel price rise, a larger base effect will also put pressure on inflation figures to be released next week. |
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| Inflation rate saw a steep decline during the week ended June 9, 2007, to 4.28 per cent from 5.09 per cent during the previous week. |
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| However, Planning Commission deputy chairman Montek Singh Ahluwalia said today a good monsoon would strengthen the agriculture sector and bring down prices of commodities. |
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| Analysts also apprehend that the Reserve Bank of India (RBI) may further tighten monetary measures before its quarterly policy review on July 29. The central bank on Wednesday unexpectedly raised repo rate by 25 basis points to a six-year high of 8 per cent, to keep a check on rising inflationary expectations. |
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| "The current spike in inflation justifies the repo rate hike by the central bank. However, RBI's action cannot bring down inflation rate in the next two to three months," said Dharmakirti Joshi, principal economist, Crisil. |
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| Both Joshi and Barua expect another repo rate hike by 25 bps. "Another rate hike before the July policy review can not be ruled out," Joshi added. |
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| However, Bhattacharya said he expects a 25 bps hike in the cash reserve ratio. |
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| "This will have an instant impact on curbing liquidity in the monetary system curbing credit growth," he added. |
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