17.7.12

Inflation eases to 7.25% in June



Inflation eased marginally in June but pressure on food prices remained which could make it difficult for the central bank to cut interest rates when it reviews policy later this month. “The annual rate of inflation, based on monthly WPI, stood at 7.25% for June, 2012, compared to 7.55% for the previous month and 9.51% during the corresponding month of the previous year,” a government statement said.
“Build up inflation in the financial year so far was 1.99% compared to a build up of 2.41% in the corresponding period of the previous year.” The government revised upwards the April inflation number to 7.50% from the previously reported 7.23% that also signalled the extent of price pressures.
Food inflation remained in double-digits for the fourth consecutive month on the back of higher vegetables and pulses prices. Vegetables prices rose an annual 48.84%, while pulses prices shot up 20.48%. But there was some comfort as prices of fruits, egg, meat, fish and milk softened. The monsoon rains will play a crucial role in influencing the pattern of food prices in the coming weeks.
Expectations of a cut in interest rates mounted due to the lower inflation print but economists said the pattern of monsoon rains in the coming weeks would be crucial and some expect RBI to hold rates when it reviews policy on July 31. RBI has consistently cautioned about the stubborn inflationary pressures.

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