Fuel inflation up, rate hike soon

Jul 08, 2010 |

Reuters

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July 8: Food inflation eased, but fuel inflation accelerated in late June and a recent hike in fuel prices kept the case for the Reserve Bank to top up its last Friday’s rate hike when it reviews policy on July 27.

The second straight weekly fall in food inflation would give little cheer to policymakers as the recent fuel price hike could push up by over 1 percentage point what is already the highest headline inflation level among the G20 major economies.
Data released on Thursday showed the food price index rose an annual 12.63 per cent in the year to June 26, slower than the previous week’s 12.92 percent, largely as prices in the year-ago period were high.

The fuel price index went up by 18.02 per cent during the period, compared with the previous week’s 12.90 per cent. The index will see another jump in its next reading, with the government having raised fuel prices from June 26. The primary articles index rose by 16 per cent, compared with 14.75 per cent in the previous week. Following the fuel price decision, the RBI lifted its key rates earlier-than-expected by 25 basis points, the third hike so far this year.

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