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Food inflation accelerates to 10-week high

Food inflation accelerates to 10-week high
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First Published: Thu, Dec 30 2010. 12 14 PM IST
Updated: Thu, Dec 30 2010. 12 14 PM IST
New Delhi: India’s food inflation accelerated to a 10-week high in mid-December on rising prices of vegetables, while the fuel index also rose, adding to inflationary worries in Asia’s third-largest economy.
The annual wholesale price index (WPI) inflation for November stood at 7.48%, and a recent spike in prices of vegetables like onions and potatoes as well as an increase in petrol prices earlier this month are expected to push the headline inflation number higher in December.
The food price index rose 14.44% while the fuel price index climbed 11.63% in the year to 18 December, data on Thursday showed.
“Not good numbers at all,” said Ananth Narayan G, head of fixed income, currency and commodities at Standard Chartered Bank in Mumbai.
“The bulk of the increase seems to be on account of specific items such as a few vegetables ... so perhaps there is hope these can be addressed in, say, January numbers. Otherwise, we’re looking at the possibility that March WPI numbers are significantly over the RBI target/comfort zone,” he said.
The Reserve Bank of India has set a target of 5.5% headline inflation by the end of the fiscal year in March, although it has also said the risk was to the upside.
The likelihood has been growing for another rate hike at the central bank’s next review on 25 January after it left rates unchanged on 16 December following six increases since March, traders and economists have said.
In the prior week, India’s annual food and fuel inflation stood at 12.13% and 10.74%, respectively.
The primary articles price index was up 17.24% in the latest week compared with an annual rise of 15.35% a week earlier.
Yields on India’s most traded 8.08% 2022 bond and the second most traded 8.13% 2022 bond both inched up 1 basis point each to 8.06% and 8.03% respectively after Thursday’s data release.
“The market is subdued due to the inflation figures, which are on the higher side and quite negative for debt,” said Bekxy Kuriakose, head of fixed income at L&T Investment Management.
“However, hopes of further OMOs (open market operations) are keeping interest in specific securities. A rate hike will definitely come in the January policy,” she added.
The government on Wednesday deferred a decision to hike prices of diesel, a move which could have aggravated an already high inflationary situation and stoked further price pressures in the economy.
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First Published: Thu, Dec 30 2010. 12 14 PM IST
More Topics: Inflation | WPI | Food inflation | Fuel inflation | GDP |