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Inflation at 4.13%, near 13-month low

Inflation at 4.13%, near 13-month low
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First Published: Sat, Jul 07 2007. 12 55 AM IST
Updated: Sat, Jul 07 2007. 12 55 AM IST
India’s weekly inflation rate stayed near a 13-month low in the third week of June as the highest interest rates in five years curbed demand in the world’s second-fastest growing major economy.
Wholesale prices rose 4.13% in the week ended 23 June from a year earlier, faster than 4.03% in the previous week, the commerce ministry said on Friday. Analysts had estimated inflation at 4.02%.
A low rate of inflation may bolster the case for the central bank to refrain from raising interest rates. Reserve Bank of India (RBI) governor Y.V. Reddy will meet with fellow policy makers on 31 July to decide on interest rates. “Definitely, there is a case for RBI not raising rates in the present scenario, given the impact of previous rate increases on inflation and sectors like housing and automobiles,” said Indranil Pan, chief economist at Kotak Mahindra Bank Ltd. “Whether this slowdown is sustainable or not remains to be seen.”
Inflation is at its lowest since the week ending 29 April last year, when the rate was at 3.9%, according to data compiled by Bloomberg.
India’s benchmark 10-year bonds rounded off the biggest weekly gain in five months on speculation RBI will refrain from raising interest rates. The yield on the 8.07% note due in January 2017 dropped 13 basis points this week to 8.02% at the 5:30pm close of trading in Mumbai. The price of the security rose 0.83, or 83 paise per Rs100 face amount, to 100.35.
A pause in RBI’s policy of raising rates will help strengthen economic growth. Reddy said last week that he wants to contain inflation within 5% in the current fiscal year and take it to 4% to 4.5% over the medium term.
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First Published: Sat, Jul 07 2007. 12 55 AM IST