labels: economy - general
Inflation hits a four-month high of 5.26 per centnews
27 October 2006

Mumbai: The annual rate of inflation based on the wholesale price index shot up to a four-month high of 5.26 per cent for the week ended October 14, mainly due to an increase in prices of food and manufactured items.

Coming ahead of the Reserve Bank''s busy season credit policy review on October 31, the upward shift in inflation trend is likely to put pressure on interest rates. The 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 contain inflation.

The rate of 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 also the highest rate of inflation in 17 weeks after it touched 5.44 per cent during the week ended June 17.

The inflation was fuelled mainly by a rise in prices of 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.

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

The government had, in July, removed restriction on imports of pulses and wheat while banning export of sugar to ensure adequate supply for consumption and promised further steps to contain price rise, mainly of essential items.

The government wants to keep inflation below five per cent and it is likely that the RBI takes more monetary curbs to ease inflationary trends.

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Inflation hits a four-month high of 5.26 per cent