Inflation falls to 10-month low at 5.06%

Inflation falls to 10-month low at 5.06%
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First Published: Fri, Jun 01 2007. 01 06 PM IST
Updated: Fri, Jun 01 2007. 01 06 PM IST
By Reuters
New Delhi: Inflation fell to its lowest level in nearly 10 months in mid-May, official data showed on 1 June, but analysts said they do not expect any change in the policy stance of the central bank.
The widely tracked wholesale price index rose 5.06% in the 12 months to 19 May, slowing from 5.27% a week earlier and well below a two-year high of 6.69% in late January.
The latest figure was the lowest annual rate since 29 July last year and was in line with a median forecast of 5.07% in a Reuters poll of analysts.
It also matched the figure given by Finance Minister Palaniappan Chidambaram on the evening of 31 May.
Analysts said the data showed that there was no increase in manufactured product and food prices, which augured well.
“If there is no increase in manufactured product and food prices in the next few weeks it will be goods news for inflation,” said Saumitra Chaudhuri, economic adviser of domestic credit rating agency ICRA.
“But we do not expect any change in the monetary policy stance.”
The Indian economy, Asia’s third-largest, grew 9.4% in the fiscal year that ended March, its fastest rate in 18 years and second only to China, among major global economies.
The central bank has raised interest rates five times since last June to rein in inflation and credit growth. It held its main lending rate steady at 7.75% at a policy review in April, but said it would act swiftly if needed.
It aims to keep inflation close to 5% this fiscal year, and bring it down to 4.0-4.5% over the medium term.
The 10-year government bond yield was unchanged 8.08% from before the data, and the partially convertible rupee was steady at 40.54 per dollar.
The government has cut petrol and diesel prices to help tame inflation. It has cut import duty on cement, capital goods, steel, aluminium, copper and other industrial raw materials, as well as palm and sunflower oil and a string of other products.
The wholesale price index is more closely watched in India than the consumer price index, which is published monthly, because it covers a higher number of products and is published weekly.
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First Published: Fri, Jun 01 2007. 01 06 PM IST
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