Inflation continues to remain high, rate hike likely again
October 14th, 2011 - 6:54 pm ICT by IANSNew Delhi, Oct 14 (IANS) India’s annual inflation based on wholesale prices continued to hover close to double digits — at 9.72 percent — for September, official data showed Friday, strengthening the likelihood of another rate hike by the Reserve Bank.The annual inflation was registered at 9.78 percent in August. The provisional figures for July too were revised upwards to 9.36 percent, compared to 9.22 percent previously reported, according to data released by the commerce and industry ministry.
September is the 10th straight month when inflation has been over 9 percent, putting pressure on the central bank to hike interest rates.
Reserve Bank of India Governor Duvvuri Subbarao had said Thursday that inflation at more than 9 percent was above the “comfort level.”
In the month under review, the primary articles index rose to 11.84 percent, while that for fuel and power rose 14.09 percent.
The index of manufactured products, which has the highest weightage on the wholesale price index, rose 7.69 percent in September. The Food articles index registered an increase of 9.23 percent.
Although the RBI has indicated many times in the past that it would continue to adopt a hawkish stance until inflation eases, poor industrial output numbers for July and August will make the central bank hesitant in hiking rates by a significant quantum.
In its last review Sep 16, the central had raised the rep rate by 25 basis points. The RBI has hiked its policy rates 12 times since January 2010 in its war against inflation.
“9.3 or 9.8 percent does not make any difference. Inflation is still high,” said RBI deputy governor, K.C. Chakrabarty.
“If inflation goes up, interest rates will go up anywhere in the world. I have no other instrument available with me to contain inflation”, added Chakrabarty.
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