Inflation soars to a fresh high of 11.89% on rising prices.

Inflation raced to a fresh high of 11.89 per cent for the week ended June 28, 2008, on the back of surging food and commodity prices.
Food products rose 0.3 per cent and primary articles were up 0.9 per cent. Likewise, vegetables were up 3.7% and chemicals and products rose 1.2 per cent. However, iron and steel fell 1.4 per cent and fuel remained unchanged.

Inflation trend continues to remain higher and is expected to touch 11.9% next week ended July 04, 2008.

Inflation had already soared to 11.63 per cent for the week ended June 21, 2008. Sadly, however, there is no respite in sight from this soaring inflation. Finance ministry officials have already said that inflation could inch up to 13 per cent before making a slow descent.

Experts too are of the opinion that double-digit inflation is here to stay for some more time, but could trend down in September. With prices of crucial commodities like steel likely to rise further, inflation is expected to stay over 11 per cent before it peaks around September, they say.

It is estimated that steel and steel products (used in industries like auto, housing, white goods, capital goods etc) contribute almost 21 per cent to inflation. Cement prices are expected to remain soft, thanks to capacity addition.

It is the 20th consecutive week that the inflation rate has been above 5.5 per cent, the central bank's target for the end of the fiscal year in March 2009.

On Tuesday, Finance Minister Palaniappan Chidambaram said the government was relying on monetary policy to cool demand and calm prices. Last month, the central bank raised its main lending rate by 75 basis points and increased banks' reserve requirement by 50 basis points to contain inflation expectations. Its next scheduled review is on July 29, but it can act before then. Market is expecting a further repo rate cut of 25bps.

The wholesale price index is more closely watched than the consumer price index (CPI) because it includes more products and is also published weekly. The CPI is released monthly.
Source: - ET