RBI May Raise Repo Rate by 25 Basis Points

RBI May Raise Repo Rate by 25 Basis PointsAs per reports of ICRA on weekly food inflation, WPI inflation has increased by 9.4% in June 2011. The high rates in WPI inflation were due to June’s revised prices for kerosene, diesel and LPG known as fuel index and also due to mineral index which reflected commodity prices. In May 2011 the overall WPI was 9.1%. There has been an increase, but it was still less than ICRA expected number- 9.7%.

There was a marginal decline in inflation related to non-food manufactured products to 7.23% in June 2011 from 7.27% in May 2011. These figures somewhere gave relief. But prices remained to soar in non-food manufactured products. RBI would continue to stick with monetary tightening. The Reserve Bank of India (RBI) would increase key policy rates by 25 basis points, for last time at its monetary policy review meeting coming up on July 26.

Experts agreed that RBI could do that. Their claim was based on the fact that the wholesale price index, for June came to be 9.44%, under a projected double-digit growth, despite a rise in the prices of fuel and manufactured products. They also told that if April revision is to be considered then inflation has remained above 9% since January, and the recent fuel price hike would have a pause effect on inflation too. According to experts, RBI would focus on inflation in order to bring back still-high inflation expectations rather on slow growth.