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Friday, October 28, 2011

Inflation is still untamable –Shall interest rates shall come down?

Yesterday inflation data were released and according to that food inflation soared to over 6-month high of 11.43%, for the second week of the October.
Prices of vegetables and fruits grew dearer by 25% and 12% respectively, adding to the inflation woes of the common man.
Again protein diet (milk, poultry and fish) became dearer by each over 10-percent.
RBI governor had clearly warned that unless inflation remains subdued monetary tightening shall continue. Rising food inflation is arising due to supply side constraint and monetary tightening can’t be continued like that else it shall be detrimental for the GDP growth rate, which has already come down.
If USA and Europe come out of the recession imparting upward pressure on the crude prices, which shall further aggravate the domestic inflation.
RBI has already hiked the policy rates 13 times in a row in order to tame the inflation and any further rises shall jeopardize the GDP growth rate.


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