Inflation
would play crucial role in next RBI policy..?
There is little respite from rising prices. The wholesale price index,
the most widely-watched indicator of inflation in India, rose 6.46 per cent in
September from a year earlier. That is sharply higher than August's level of
6.10% and 5.85% in July’s level. It is well above the RBI's comfort level of 5
percent level. The biggest driver of inflation is still food inflation, which
accelerated to a three-year high of 18.40 percent in September from 18.8
percent in August because of supply disruptions due to heavy monsoon and
poor storage facilities.
This is the fourth straight month that wholesale inflation has remained
above the Reserve Bank of India's comfort zone and could add pressure on it to
raise interest rates. A Reuters poll of economists predicted wholesale
inflation at 6 percent for the month of September.
The elevated price levels will add more pressure on the Reserve Bank of
India – which has clearly signalled that it will target inflation – to raise
interest rates even as the economy is growing at its weakest pace in a decade.
At its last policy review on September 20, the RBI's new governor Raghuram Rajan had surprised everyone by increasing its main lending rate by 0.25 percent and clearly signaled that the central bank's focus would be on bringing down inflation. The RBI would be closely watching the September inflation numbers to determine its next rate action. The RBI's next policy review is scheduled for October 29. Economists polled by Reuters have forecast a further 50 basis points of increases in the RBI's main lending rate in six months.
Supply disruptions following heavy rainfall in some parts of the country have driven up food prices, particularly vegetable prices, in recent months. A weak rupee, along with increase in fuel prices, has kept upward pressure on inflation. The consumer inflation data will be released later today evening.
At its last policy review on September 20, the RBI's new governor Raghuram Rajan had surprised everyone by increasing its main lending rate by 0.25 percent and clearly signaled that the central bank's focus would be on bringing down inflation. The RBI would be closely watching the September inflation numbers to determine its next rate action. The RBI's next policy review is scheduled for October 29. Economists polled by Reuters have forecast a further 50 basis points of increases in the RBI's main lending rate in six months.
Supply disruptions following heavy rainfall in some parts of the country have driven up food prices, particularly vegetable prices, in recent months. A weak rupee, along with increase in fuel prices, has kept upward pressure on inflation. The consumer inflation data will be released later today evening.
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