Mumbai : The Reserve Bank today said year-on- year inflation was higher at 5.7% at the end of fiscal 2006-07, indicating more measures to tighten its credit policy to be announced tomorrow.
The RBI had projected an annual inflation rate of 5-5.5% for the last fiscal but it turned out to be 5.7% as on 31 March, 2007 as compared to 4% a year ago.
The central bank, in its macro-economic and monetary developments review for 2006-07, said it would continue to pursue the medium-term goal of a ceiling on inflation at 5%.
It warned that measures of Consumer Price Index (CPI)- based inflation remained above the Wholesale Price Index (WPI) -based inflation throughout the year mainly reflecting the impact of higher food prices.
“The RBI continued with the policy of gradual withdrawal of monetary accommodation using various instruments at its disposal flexibly to stabilise inflationary expectations,” it said in the review, released on the eve of its credit policy.
But prices of primary food articles and manufactured products exerted upward pressure on headline inflation, which is based on WPI.
Wholesale price inflation was generally within RBI’s indicative projection of 5-5.5% up to mid-November 2006 but rose above the upper end of the bank, it said.
Headline and core inflation remained at elevated levels in many economies during the first half of 2006-07, reflecting high commodity prices and strong demand conditions.