April 7: Food inflation, which measures the pace of rise of agri-commodities fell to four-month low at 9.18 per cent for the week ended on March 26. However, economists don’t expect the food inflation to moderate significantly in the coming days.
All eyes are now on overall inflation data for the month of March, which will come out next week. Some economists believe that inflation will not come down to 8 per cent as targeted by the RBI for March. In the past the apex bank has been forced to revise the inflation target several times. Last month RBI had raised its projection for inflation for the March end to 8 per cent from its earlier estimate of 7 per cent. The overall inflation was at 8.31 per cent in February.
The apex bank has indicated that it will not accept high inflation in the country which will mean that it could turn more hawkish in its next policy review. Earlier this week, the RBI deputy governor, Dr Subir Gokarn, had said the central bank cannot afford to be slack on inflation merely because it is coming from a certain set of factors. He added that the challenge for RBI was to ensure that these supply-side factors did not spill over into more generalised inflation.
“I expect the inflation to be at 8.9 per cent in March much above the RBI target,” said Dr Rupa Rege Nitsure, chief economist, Bank of Baroda. She said that in 2011, the RBI may go for three more hikes of 0.25 per cent each. She said that currently the pressure on food prices are coming from vegetables and fruits.