Mumbai: The annual rate of inflation based on the wholesale price index (WPI) breached the upper range of RBI's target of 5.5 per cent for this fiscal, and stood at 5.58 per cent for the week ended December 30.

The inflation rate stood at 5.48 per cent in the previous week and 4.56 per cent in the corresponding period of the previous year.

While provisional estimates put the inflation rate of 5.58 per cent for the week as the highest this fiscal, as per the revised estimates, inflation had already touched 5.61 per cent during the week ended October 21.

The current rise is due mainly to higher prices of food articles, some fuel items and a few manufactured products.

Poultry chicken, fish marine, arhar, fruits, cottonseeds, gingelli seed, furnace oil, naphtha, epoxy resins became dearer. However, prices of eggs, gram, vegetables, tea and coffee declined.

With inflation crossing the 5.5-per cent mark, the Reserve Bank has a difficult choice to either attack inflation or provide more cash to the banking system for lending.

The central bank has already effected a hike in the minimum cash reserve requirements of banks to 5.50 per cent from 5.0 per cent of their total deposits. This has sucked around Rs13,500 crore from the system and has created an upward momentum in short-term interest rates.

Also, while bank credit has been growing at over 30 per cent for the past 20 months, deposit growth has been around 20 per cent.