Inflation inches up to 11.91%, may force RBI to increase rates

I met RBI Governor Y V Reddy. Governor said there is still pressure on prices. I am in broad agreement with him," Chidambaram told reporters after a Cabinet meeting on Thursday. "So, if these monetary measures take effect, Governor expects some moderation (in inflation) over a period of time," he said.During the week ended 5th July, inflation moved up marginally by 0.02 percent to a 13-year high of 11.91 percent.
In the comparable period last year, the rate of price rise was 4.61 percent.Food items, including pulses, atta, tea, fruits, as also some petroleum products like jet fuel became more expensive during the week under review, according to the wholesale price index released by the government on Thursday.Describing the increase in inflation "very marginal" the Finance Ministry in a statement said "the annual inflation rate for the group of 30 essential commodities has declined to 5.74 from 5.98 percent reported for the week ending June 28, 2008."It further said the prices of essential commodities like food grains, pulses, edible oils, vegetable, dairy products and some other commodities including kerosene, soap and safety matches have more or less stabilised.
The Finance Ministry further said inflation on a week-on-week basis has stabilised.The Ministry said out of 98 primary articles, 13 have shown decline in prices and 57 have shown no increase in prices.
In manufactured category, 281 of total 320 commodities have shown no rise in prices, while prices declined in case of 12 commodities.Marginal increase in inflation is mainly because of higher prices of some of the petroleum products like naphtha which went up by eight percent, light diesel oil by seven percent, aviation turbine fuel by five percent.
However, prices of cooking gas declined by five percent.The continued rise in prices, though marginal, may prompt RBI to further tighten money supply in its quarterly review slated for 29th July, analysts said."To anchor inflation, the RBI may increase CRR by 50 basis points and repo rate by 25 basis points," Crisil Principal Economist D K Joshi told.RBI has already on 24th June increased repo rate (short term lending rate)and CRR (mandatory deposit kept with the RBI) by 0.5 percent each to check price rise.During the week, prices of tea increased by two percent, while masur and moong became expensive by 1 percent eachIn the manufactured goods category, rice bran oil and maida became expensive by two percent each atta, coconut oil and imported edible oil were dearer by one percent each.
Elsewhere, steel ingots became dearer by 21 percent, bright bars by 10 percent, pig iron by 5 percent, bars and rods by 2 percent and steel sheet and plates by 1percent.
As per the revised data inflation rate for the week ended 10th May has been updated to 8.57 percent as against 7.82 percent reported earlier.