Food, global commodity prices, demand pressures to shape infln

Mumbai, Jan 25 (PTI) Inflation outlook going forwardwould be influenced by factors like food price situation,behaviour of global commodity prices and the extent to whichdemand-side pressures may manifest, the Reserve Bank todaysaid.

Domestic food price inflation has witnessed a highvolatility since mid-2009 due to both structural andtransitory factors and a significant part of the recentincrease is due to structural constraints, the Reserve Banksaid in its third-quarter monetary policy review for FY 11.

"This is reflected in the less than expectedmoderation in food price inflation even in a normal monsoonyear," the RBI said.

Transitory supply-shocks have resulted in a sharpincrease in the prices of some food items, it said.

"What is more worrying is the substantial increase inprices of several food items even though their production hasnot been affected," the apex bank said, adding "as a result,the usual moderation in vegetable prices in the winter seasonhas not materialised."

As food prices have spiked in many countries andIndia being a large importer of certain food items like edibleoils, the domestic food price situation could be exacerbatedby the increase in global food prices, it said.

"This, therefore, poses an additional risk to domesticfood price inflation," it added.

On global commodity prices, the RBI said that some oftheir prices have risen sharply in the recent period, even asthe global recovery was fragile. .