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April wholesale inflation seen at 9.5%

April wholesale inflation seen at 9.5%
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First Published: Fri, May 14 2010. 09 42 AM IST
Updated: Fri, May 14 2010. 09 42 AM IST
New Delhi: Wholesale price index probably rose 9.5% in April from a year earlier. forecasts from 21 economists ranged from +9.2% to +10.6%.
The index rose an annual 9.90% in March, its highest in 17 months.
Factors to watch:
Focus will be on price pressures in manufacturing as this will determine the quantum of monetary tightening in coming months.
Subir Gokarn, a deputy governor at the Reserve Bank of India (RBI), has said high manufacturing inflation would be considered for policy making as it was more worrisome than food prices.
“Core inflation will be closely tracked as in recent months it has accelerated, though it remains below 5%. Rising core inflation suggests that demand conditions are improving and the pricing power has returned,” said Shubhada Rao, chief economist at Yes Bank.
Market impact:
Expectations for a rate increase by the central bank ahead of the next policy review in July have receded following the euro zone debt problems and shaky global sentiment.
The RBI had twice raised policy rates in 2010, by a combined 50 basis points, to rein in inflation pressures as the economic growth picks up momentum.
The yield on the most-traded 8.20% 2022 bond , which climbed to an 18-month-high of 8.32% on 16 April ahead of the last policy meeting, has since dropped 43 basis points in a relief rally, according to Reuters data.
Traders say any policy tightening will be gradual as keeping market conditions calm is a priority for the central bank to help the government borrow Rs287 crore ($64 billion) in the six months through September.
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First Published: Fri, May 14 2010. 09 42 AM IST
More Topics: Wholesale Price Index | WPI | Inflation | Economy | RBI |