Inflation eases to minus 1.54 pc, price rises haunt
Inflation eases to minus 1.54 pc, price rises haunt
Political parties want Govt to provide low-priced staple food products.

New Delhi: Inflation has eased to (-) 1.54 per cent for the week ended July 18 against (-) 1.17 per cent in the previous week.

The issue of price rise against negative inflation has already been taken up many political parties who believe that the basic diet of vegetables and pulses has become way too expensive for the common man.

Rising concern over inflation has triggered the countdown of the Reserve Bank's accommodating monetary policy stance and the key policy rates may soon be hiked, two major banks said.

"The RBI left all its key policy rates unchanged ... but revealed a clear discomfort over the trajectory of inflation and a consequent urgency in removing policy accommodation in the future," DBS Bank said.

Southeast Asia's largest lender Development Bank of Singapore (DBS) said, in a research note, the rate hikes from the Reserve Bank of India may come as early as October but no later than March 2010.

It now expects RBI to raise its short-term lending (repo) rates by 75 basis points to 5.50 per cent by March 2010 and further to 6.25 per cent by June 2010.

Meanwhile, Standard Chartered said, "While the RBI s focus remains mainly on promoting growth, the traditional monetary policy stance of watching for threats of inflation has resurfaced."

The central bank has revised its inflation projection upwards for end-March 2010 to 5 per cent from 4 per cent and mentioned that delayed monsoons would bring upside risks to this forecast.

"Against the backdrop of the RBI s revised growth ('upward bias' to 6 per cent) and inflation outlook, we believe that the bottom of the rate-cutting cycle has been reached," Standard Chartered said in a note.

The RBI is likely to adopt wait-and-watch approach for the rest of 2009 before raising rates at the end of first quarter 2010, it said retaining its repo rate view at 5.50 per cent by March-end.

"In the face of continued fiscal stimulus, monetary policy measures aimed at withdrawing excess liquidity and addressing asset price inflation should ideally precede a rate hike," the bank said.

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