Inflation for week ended March 15 stands at 6.68% as against 5.92%, which is much above the market’s expectations of around 6%. It’s at a 59-week high.

Sucheta Mehta, Economist at Standard Chartered Bank, said we might see more fiscal measures being announced to clampdown inflation. “That seems to be a more prudent choice at this point in time. We are not going to see any spiralling up of interest rates.”

Excerpts from CNBC-TV18’s exclusive interview with Sucheta Mehta:

Q: Did it come as a shocker for most market experts and what would you pencil in now by way of any kind of RBI action in the next few meeting?

A: This number was a clear shocker for the markets and us. The markets were around 60 bps lower in terms of expectations on the inflation rate. This is a second consecutive week when we are seeing inflation in excess of 50 bps above what the market was expecting. So, it is a clear shocker.

In terms of what RBI can do? I think very little. Growth rates have been moderating a bit and inflation is caused more by the supply side. There might be some room for action. We are not going to see any spiralling up of interest rates. We might see more fiscal measures being announced to clampdown inflation and that seems to be a more prudent choice at this point in time.

Q: You were saying not much by way of interest rates. What if next week’s inflation comes more than 7% because it is already close to that? Then, do you think it merits a re-think if not on CRR perhaps on the repo or reverse repo?

A: Since the beginning of the year we have maintained that RBI will maintain a hawkish policy. In its January policy, RBI said inflation is a clear risk and it is unlikely to do anything to rates in the near-term. Even though risk of any action might be there, we don’t see RBI raising rates because growth is going to be a clear casualty. Growth rates have started looking slightly weaker. We would expect RBI to wait and see how things would go. But as markets were expecting in the past, rates could come down because of weaker growth. It doesn’t seem to be the case even though inflation is a clear problem.

Q: Why is the market so off the mark with inflation? Why is there this big disparity in what the market is penciling in and what is reported by way of inflation figure?

A: In the past few weeks, we did notice that metal prices have not been allying to actual changes from the ground on the inflation number. Obviously, if one looks at edible oil, food, fuel and metals, they are all higher than what they were earlier.

Internationally, these prices have gone up quite significantly, way ahead of what markets were looking at. So, the way commodity prices have moved in the past is beginning to show on inflation numbers.