New Delhi: Inflation held near a five-week low, making it less likely the Reserve Bank of India (RBI) will add to its three interest rate increases since June.
Wholesale prices rose 12.14% in the week to 6 September from a year earlier, after gaining 12.1% in the previous week, the commerce ministry said.
Also See SLOWING PACE (Graphic)
Smaller price gains and increased outflows of overseas funds, triggered by the collapse of Lehman Brothers Holdings Inc. and the sale of Merrill Lynch and Co., may prompt RBI to shift its focus from raising borrowing costs to stimulating the economy. The central bank expects growth this year to be the slowest since 2005.
“Given the current global environment and the measures taken by the Reserve Bank this week, the probability of a rate hike in October meeting has diminished,’’ said Tushar Poddar, an economist at Goldman Sachs Group Inc. in Mumbai.
RBI had on 16 September announced steps to boost cash in the country’s financial system to soften the impact of the global credit crisis.
The commerce ministry on Thursday raised its inflation estimate for the week ended 12 July to 12.13% from 11.89%. The ministry revises preliminary wholesale price estimate after two months on receiving additional data.