India's annual inflation rate holds steady

NEW DELHI — India's annual inflation rate held steady in early July, data showed yesterday, reinforcing expectations the central bank would leave interest rates unchanged at a July 31 policy review.

By (Reuters)

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Published: Sat 21 Jul 2007, 8:54 AM

Last updated: Sat 4 Apr 2015, 10:21 PM

The wholesale price index rose 4.27 per cent in the 12 months to July 7, matching the annual rise of the previous week, to be just below a median forecast of 4.32 per cent in a Reuters poll.

Inflation rose in the last two weeks of June after hitting a 14-month low of 4.03 per cent in mid-June, but it is well below a two-year high of 6.69 per cent hit in late January.

Analysts said the slight pick-up in prices was mainly due to the annual monsoon pushing up food prices, a seasonal factor that was unlikely to prompt a response from the central bank.

"The spike in inflation over the last two weeks is because of primary articles shooting up again. I think this is temporary and we should see the moderation to continue going forward," said Harish Menon, economist, ING Vysya Bank.

"I don't expect anything in terms of monetary policy from the central bank at the next policy,"

Markets showed little reaction, with the rupee and 10-year bond moving only slightly after the data.

Annual inflation for the week ended May 12 was revised to 5.62 per cent from 5.27 per cent, suggesting the June low could also eventually be revised higher.

Finance Minister Palaniappan Chidambaram told Reuters on Thursday that higher crude oil and food prices did not necessarily mean monetary policy would be tightened.

The Reserve Bank of India, which is aiming to contain inflation near 5 per cent for the fiscal year ending March 2008, kept its short-term lending rate steady at its April review after raising it five times since mid-2006.

The wholesale price index is more closely watched than the consumer price index (CPI) because it includes a higher number of products and is published weekly. The CPI is released monthly.

Indian rupee rise to hit growth: India should not use the rupee to check inflation pressures as the currency's strong surge this year will only hurt growth, a member of the central bank's panel on capital account convertibility said.

"I don't think the exchange rate can be or should be used to contain inflation. Alarm bells are already ringing due to the sharp appreciation of the rupee and this will affect growth," Surjit Bhalla, principal at Oxus Research & Investments, said.

"The costs are lower growth and benefits are none."

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