FE Editorial : 25 bps or 50 bps?
Given the recent hike in diesel prices, and the promise of one more such each month for the next two years, chances are RBIís monetary policy statement on Tuesday will refer to this as one of the underlying inflationary pressures in the months ahead. It will probably do the same when it comes to the renewed pressure on global crude prices now that there is an improvement in economic prospects in both the US and China. Then thereís the fact that consumer inflation is back to double digits.
Even so, there can be little doubt inflationary pressures have hugely eased. If wholesale inflation remained at around 10% levels for each month of FY11 and eased to the 7.5% level by the last quarter of FY12, this came down further to around 7.2% in the third quarter of FY13óand the drop in Q3 inflation numbers isnít due to a high base in the same quarter of FY12 either since inflation had started winding down by then. Indeed, if inflation has remained at even the level it has, it is because primary articles (with a 20% WPI weight) are seeing inflation rise. In terms of RBIís definition of core inflation that strips away food products within the manufacturing space, this is down to 4.2% which is just a bit higher than the central bankís stated comfort level of 4%. None of this, of course, comes as a surprise given that weíve had positive growth in
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