New Delhi: Costlier food items such as vegetables pushed up inflation to 4.27% for the week ended 30 June, but analysts say the Reserve Bank is unlikely to raise borrowing costs as the price index was within limits.
Although the wholesale prices-based inflation was lower than the year-ago level of 5.21%, it rose for the second week in a row after rains across the country disrupted supply of vegetables and made them dearer. Analysts said farmers were unable to go to fields because of rains, but once rains end supply would increase and prices would cool down.
Inflation had risen 4.13% in the previous week. The price index is still below the RBI’s projection of close to 5% for the current fiscal and within the target of 4-4.5% in the medium term.
Analysts said RBI was unlikely to increase interest rates in its quarterly credit policy review on 31 July.
“Key interest rates will remain same... but RBI may take pre-emptive steps in its review to ensure inflation keeps within limits,” HDFC chief economist Abheek Baruah told PTI.
HDFC chairman Deepak Parekh had also said earlier this week that interest rates had peaked and were unlikely to increase further. But it was also unlikely the rates would come down, he had added.
During the week under review, vegetable prices soared 4.5%. Prices of all food articles were up by 0.7% with pulses like masur becoming costlier by 5%, and jowar and fish-marine rising by 1% each. Prices of condiments and spices went up by 2%. However, prices of coarse grain, bajra declined 1%.