India's inflation accelerated at the fastest pace in more than three years, vindicating the central bank's decision to order commercial lenders to increase reserves twice last month.
Wholesale prices rose 7.57 per cent in the week ended April 19 from a year earlier, after gaining 7.33 per cent in the previous week, the government said in a statement here yesterday. Economists had expected a 7.42 per cent increase.
Prime Minister Manmohan Singh, seeking to stay in power in elections due next year, has adopted a series of measures to tame inflation that has doubled in the last five months.
Faster gains in prices prompted the Reserve Bank of India to raise its cash reserve ratio to a seven-year high.
'The government may take more fiscal measures as inflation will remain elevated for the next few months,' said Rajeev Malik, senior economist at JPMorgan Chase & Co in Singapore.
'Additionally, more monetary tightening cannot be ruled out.'
The government on April 29 scrapped import duties on steel products including pig iron, hot-rolled coils, ferrous alloys and zinc and imposed an export tax on the overseas sales of some other steel products to augment local stocks.
To add to Mr Singh's efforts to rein in inflation, the central bank on April 29 unexpectedly ordered lenders to set aside more reserves, raising the cash reserve ratio to 8.25 per cent from 8 per cent the highest since March 2001.
Finance Minister Palaniappan Chidambaram yesterday said the inflation will be curbed, with food prices being the first to ease.
The government will take further measures to contain prices, he said speaking to reporters in the southern Indian city of Bangalore.
The yield on the benchmark 8.24 per cent note due in April 2018 was little changed at 7.88 per cent as of 12:05pm in Mumbai, according to the central bank's trading system.
The monetary and fiscal steps will help moderate inflation in the next two to three months, central bank governor Yaga Venugopal Reddy said after last month's policy statement.
The central bank said it expects inflation of as much as 5.5 per cent in the year to March 31, higher than its previous year's target of 5 per cent.
The Reserve Bank may raise the so-called cash reserve ratio for the third time this year to as high as 8.75 per cent, according to a Bloomberg News survey of nine economists.
Mr Chidambaram yesterday said he doesn't expect commercial lenders to raise interest rates after the central bank asked lenders to set aside more money.
Banks are 'quite happy that only the cash reserve ratio has been hiked and policy rates have been untouched', Mr Chidambaram said after meeting the chief executives of state- owned banks here.
Wholesale prices rose 7.57 per cent in the week ended April 19 from a year earlier, after gaining 7.33 per cent in the previous week, the government said in a statement here yesterday. Economists had expected a 7.42 per cent increase.
Prime Minister Manmohan Singh, seeking to stay in power in elections due next year, has adopted a series of measures to tame inflation that has doubled in the last five months.
Faster gains in prices prompted the Reserve Bank of India to raise its cash reserve ratio to a seven-year high.
'The government may take more fiscal measures as inflation will remain elevated for the next few months,' said Rajeev Malik, senior economist at JPMorgan Chase & Co in Singapore.
'Additionally, more monetary tightening cannot be ruled out.'
The government on April 29 scrapped import duties on steel products including pig iron, hot-rolled coils, ferrous alloys and zinc and imposed an export tax on the overseas sales of some other steel products to augment local stocks.
To add to Mr Singh's efforts to rein in inflation, the central bank on April 29 unexpectedly ordered lenders to set aside more reserves, raising the cash reserve ratio to 8.25 per cent from 8 per cent the highest since March 2001.
Finance Minister Palaniappan Chidambaram yesterday said the inflation will be curbed, with food prices being the first to ease.
The government will take further measures to contain prices, he said speaking to reporters in the southern Indian city of Bangalore.
The yield on the benchmark 8.24 per cent note due in April 2018 was little changed at 7.88 per cent as of 12:05pm in Mumbai, according to the central bank's trading system.
The monetary and fiscal steps will help moderate inflation in the next two to three months, central bank governor Yaga Venugopal Reddy said after last month's policy statement.
The central bank said it expects inflation of as much as 5.5 per cent in the year to March 31, higher than its previous year's target of 5 per cent.
The Reserve Bank may raise the so-called cash reserve ratio for the third time this year to as high as 8.75 per cent, according to a Bloomberg News survey of nine economists.
Mr Chidambaram yesterday said he doesn't expect commercial lenders to raise interest rates after the central bank asked lenders to set aside more money.
Banks are 'quite happy that only the cash reserve ratio has been hiked and policy rates have been untouched', Mr Chidambaram said after meeting the chief executives of state- owned banks here.
Posts
No comments:
Post a Comment