Food inflation inches up to 15.57%;experts see more rate hikes

Posted By: Pti
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New Delhi, Jan 27 (PTI) Dearer vegetables pushed up thefood inflation marginally to 15.57 per cent for the week endedJanuary 15, prompting experts to say that RBI may go for yetanother round of rate hike in its mid-quarterly policy reviewin March.

Food inflation was 15.52 per cent for the week endedJanuary 8. It was 20.07 per cent a year ago.

Based on price movement in the wholesale market foodinflation rose by 0.05 percentage points for the week endedJanuary 15 after declining for two consecutive weeks.

While the vegetable prices soared by 67.07 per cent on anannual basis, onion became expensive by 111.58 per cent.

Onion prices, however, have declined recently on accountof the government initiatives like ban on its export andmaking available the essential kitchen item from state-ownedentities.

Besides vegetables, fruits, milk and other protein-baseditems became expensive during the week. The prices of wheatand pulses, however, witnessed a decline.

"We believe some more rate hike is on the cards and theinflation rate is not showing signs of abatement," CrisilChief Economist D K Joshi said, while commenting on marginalrise in food inflation.

Expressing similar opinion, ICRA economist Aditi Nayarsaid: "The RBI is likely to hike its short-term lending andborrowing rates by 25 basis points in its March review andagain by the same rate in the first quarter of 2011-12."

The central bank in its quarterly review of the monetarypolicy on Tuesday raised the short-term lending (repo) andborrowing (reverse-repo) rates by 25 basis points to checkinflationary expectations.

Given the current trend of price rise, RBI raised theMarch-end forecast of headline inflation to 7 per cent from5.5 per cent earlier.

The mid-quarterly policy will be announced by the RBI onMarch 17.

The experts, however, feel that food prices will moderatein the coming months.

"Going ahead we believe food inflation will come down,"Joshi said, adding that food inflation largely depends onseasonal factors, "specially vegetable prices."

According to Nayar: "Food prices are extremely volatiledue to the perishable nature of many commodities. We believethat by the end of January the prices of vegetables will comedown and this will show in the food inflation figures byFebruary."

Experts, however, cautioned against rising crude oilprices in the international market and said it could play aspoilsport in the overall inflation. .

"The petroleum sector will play a crucial role and high global crude prices will impact the overall inflation rates,"Joshi added.

An early onset of winter leading to massive demands inEurope and the US, coupled with speculative pricing, has takenglobal crude prices to a two-year high of over USD 90 perbarrel.

During the week under review, prices of fruits went up by16.40 per cent while milk became expensive by 12.44 per centon an annual basis.

Prices of eggs, meat and fish went up by 13.58 per centyear-on-year.

Cereal prices, too, went up marginally by 0.53 per cent,with rice going up by 2.79 per cent.

However, wheat and pulses became cheaper on an annualbasis by 5.75 per cent and 14.07 per cent, respectively.

In an indication that spike in food commodities isbecoming ingrained into the wider economy, in the non-foodcategory, the prices of fibres and minerals went up by 47.23per cent and 19.52 per cent, respectively.

Fuel and power also became dearer by 10.87 per centyear-on-year.

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