India’s soaring inflation rate may not ease in the next few months. As per a recent report released by Barclays Capital, a global investment bank, inflation could hit 17 per cent by September 2008.
Fuelled by skyrocketing food and energy prices, the report says that the Reserve Bank of India will need to tighten monetary policy significantly in the coming months to contain inflation.
Furthermore, RBI is expected to further tighten the monetary policy by hiking the short-term lending rate (repo rate) and mandatory cash requirements for banks to tame inflation, indicates the report. Barclays revised average WPI inflation forecast for the current year to 14 per cent from an earlier estimate of 13 per cent.
The inflation rate, for the week ended July 5, 2008, increased further touching a 13-year high of 11.91 per cent, up from 11.63 per cent last fortnight. This is way higher than the Reserve Bank’s tolerance level of 5 per cent. All this spells tough times for the Indian consumer.
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