Inflation jumps to 7-year high of 8.75%
Inflation rose to a seven year high of 8.75% in the last week of May, as compared to 8.24% in the previous week. This is the fastest rise in inflation since February 2001. However, the worst is yet to come. The latest figure does not reflect the recent increase in auto fuel prices announced on June 4. Economists apprehend that another increase in the rate at which banks borrow from the central bank may be in the offing even as inflation may surge past the double digit mark in about a weeks’ time.
The government, which cut import duties on edible oils, fuels and other food items and banned the export of pulses, wheat, rice and cement, however, maintains that inflation would ease in about six to eight weeks.
“The latest data released on Friday does not factor in the fuel price increase or the electricity tariff hike in some states. When these get reflected in the index, inflation is expected to go up further. Wholesale price inflation may move up to 10.2% to 10.3% in a week, perhaps even higher. Another round of repo rate hike may be around the corner,” said HDFC chief economist Abheek Barua. The RBI had raised repo rate by 25 basis points to 8% earlier in the week in a bid to absorb the excess liquidity in the market and subdue demand.
