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India inflation jumps again, more tightening seen PDF Print E-mail
Monday, 30 June 2008

NEW DELHI, Fri Jun 27,( - India's annual inflation rate jumped to 11.42 percent in mid-June, its highest in more than 13 years, and analysts said on Friday the Reserve Bank of India (RBI) could follow up two rate increases this month with more policy tightening.

The wholesale price index rose to 11.42 percent in the 12 months to June 14, its highest reading since annual numbers in the current series became available in April 1995, data showed.

Inflation rose from 11.05 percent a week earlier, and topped a median forecast of 11.18 percent in a Reuters poll.

"Inflation will remain in double digits until the end of the calendar year. In order to reinforce its policy stance, the RBI will hike rates in the course of the year," said A. Prasanna, analyst with ICICI Securities.

"We expect inflation to head higher in the coming months and peak somewhere between 12 to 13 percent."

Inflation spiked into double digits after state-set fuel prices were increased by about 10 percent in early June.

The RBI on Tuesday raised its key lending rate by 50 basis points to 8.5 percent, its highest in six years, and hiked banks' reserve requirements, also by 50 basis points, in an aggressive move to combat inflation.

The RBI had also raised the repo rate by 25 basis points on June 11.

The central bank said on Tuesday that higher energy prices were no long a temporary phenomenon, and said overall demand pressures in the economy were strong.

"Even today, inflation is latent because increases in fuel prices have not kept pace with high oil prices," said Dharmakirti Joshi, principal economist at CRISIL, a ratings agency.

Finance Minister Palaniappan Chidambaram told a TV channel on Thursday that inflation would stay in double digits for "some weeks" and expected it to moderate after three months.

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