News: Inflation rate at four-month high of 5.26%

(PTI 27/10/2006) New Delhi - Ahead of the Reserve Bank's busy season credit policy review on October 31, inflation shot up to four-month high of 5.26 per cent for the week-ended October 14 mainly due to increase in prices of food and manufactured items.

The recent upward inflation trend is likely to put pressure on interest rates as RBI had raised its two key short-term interest rates by 0.25 per cent in July, the fifth such increase since October 2005 to manage inflation.

The wholesale price-based inflation at 5.26 per cent, was higher than 5.16 per cent in the previous week and 4.77 per cent in the corresponding week last year.

This was the highest inflation in 17 weeks after it touched 5.44 per cent during the week ended June 17.

Prices rose for vegetables, condiments and spices, eggs, ragi, maize, some edible oils, cement, zinc, computer, raw rubber and silk, fodder, soyabean, bidi, polyster staple fibre, methanol, carbon black and oxygen.

The prices eased for jowar, bajra and barley, oil cakes and sacking bags while there was no change in the prices of fuel group during the week under review.

The Government has time and again said it would not hesitate to take further steps to contain price rise, which is due to supply crunch of essential items.

The Finance Minister, P. Chidambaram, had said government wants to keep inflation below five per cent and more fiscal and monetary steps can be taken if required.

In July, the government had removed restriction on imports of pulses and wheat while banning export of sugar to ensure adequate supply for consumption.