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Thursday, May 16, 2013

After three years of staying consistently high, wholesale price index (WPI) finally fell below 5% in April 2013. This means that inflation is now within the comfort zone of the Reserve Bank of India (RBI). Inflation so far had been a big headache for the central bank. As a result of which it was not comfortable cutting interest rates. This is even when economic growth had considerably slowed down. With this latest piece of development, there are once again increased hopes that the central bank will bite the bullet and cut rates in its next monetary policy meeting. With commodity prices easing, there was some breather on the food inflation front as well. This slumped to 6.1% from 8.7% a month ago. Similar was the case with non-food manufacturing inflation, which slowed to 2.8% in April from 3.5% a month ago. This is after the international prices of iron ore and steel dropped. However, a lot will depend on how this trend pans out in the coming months. Further, the consu mer price inflation data will also play an important role in determining the central bank's further actions. 

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