Inflation November 2010 snapshot

The headline inflation eased in November to its lowest level in 2010, bringing relief for policymakers and fuelling expectations that RBI will hold interest rates in its scheduled mid-quarter monetary policy review on December 16. Data released by the commerce and industry ministry showed the wholesale price index rose 7.48% in November. It stood at 8.58% in October and was at 4.5% in November 2009.
Soaring inflation has been a headache for the government for several months and has led to protests. The RBI has raised interest rates six times this year to calm prices and has said controlling inflation remains a key policy challenge in the months ahead. But Tuesday’s data brought some cheer for policymakers. Finance minister Pranab Mukherjee said the latest inflation data showed that India had done well in its monetary and fiscal policies but cautioned that it was important to stay on the planned path. “These numbers take us another step towards our forecast of 6% inflation by March 2011,” Mukherjee said.
Economists said the latest inflation data will take pressure off from RBI. Although the upward revision in the inflation rate for September is a cause for some concern, it is unlikely that the RBI would revise policy rates in the December mid-quarter review of monetary policy. The government revised the September inflation number to 8.9% from the earlier provisional estimate of 8.6%.

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