Friday, July 04, 2008

Fresh record for Indian inflation

Indian petrol station worker
Reduced subsidies for fuel have increased inflation

Indian inflation set another record in the third week in June as prices of food, fuel and steel continued to rise.

Wholesale prices rose by a larger-than-expected 11.63% in the 12 months to 21 June compared with the same period the previous year.

The new record raises the chance of another interest rate rise, following two last month.

The inflation figure was up from 11.42% in the previous week, and is the highest since the series began in 1995.

Wholesale prices are more closely watched in India than consumer prices because the figures are published weekly and include more products.

Inflation jumped in the first week of June from 8.75% to 11% after the government reduced its fuel subsidies.

Interest rates will come under focus when the Reserve Bank of India (RBI) holds its next rate-setting meeting on 29 July.

"The momentum in inflation continues to accelerate and that is a worrying sign," said Sonal Varma, at Lehman Brothers in Mumbai.

"We expect the RBI to hike the repo rate by 25 basis points at the July policy [meeting]."

Meanwhile, rising food and fuel price increases pushed the Philippines' . inflation rate in June to its highest in 14 years.

Acting socio-economic planning secretary Augusto Santos said "continuous price increases of cereals and fuel" had raised annual inflation in June to 11.4% from 9.5% a month earlier.

The new figure is the biggest since May 1994, when consumer prices rose 11.5%.

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