Inflation soars to new high of 19.83 per cent

Inflation soars to new high of 19.83 per cent

Spiralling prices may force RBIs hand to hike interest rates on all borrowings

Inflation soars to new high of 19.83 per cent

The wholesale price based index of food articles went up by 1.18 per cent from 18.65 per cent a week ago.  Spurred by spiralling rise in essential food items, the annual rate of rise in prices of food items soared to 19.95 per cent — the highest in more than one decade — for the week ended December 5.
The latest food prices data for week ended on December 19 show that potato prices more than doubled while pulses became costly by over 41 percent over the last year. Onion rates rose by 40.75 per cent.  Prices of vegetables rose by 46.7 percent while fruits became dearer by 10.35 percent. Prices of wheat and rice went up by 12.66 and 12.95 per cent respectively over the last year. 

This steep rise in food inflation is likely to put pressure on the over all inflation forcing Reserve Bank to adopt tight monetary policy thereby pushing up interest rate on all borrowings like car and housing loans and commercial lending.  

Liquidity not pushing up prices: Pranab

There is no sign in the economy that excess liquidity is causing the current inflationary pressures, Finance Minister Pranab Mukherjee said here on Thursday, reports PTI from Kolkata.

“I had a detailed discussion with the RBI and found that there is no reason to believe that excess liquidity is contributing to inflation in the economy,” Mukherjee said when asked about the steep rise in food prices.

However, he acknowledged that average food prices rose by 19-23 per cent even in the wholesale price index, which is really high. “Unlike instant coffee, there is no instant solution to such vexed problems as inflation,” Mukherjee said when asked about government steps to curb the rising food prices, which for the latest week climbed back to near 20 per cent.