Inflation rises to 7.55% on costlier vegetables

Led by rising prices of vegetables and petrol, inflation moved up to 7.55% in May making it tougher for the Reserve Bank to cut interest rates in its policy next week to boost sagging growth.

Finance Minister Pranab Mukherjee expects inflation to be in the range of 6.5-7.5% during the current fiscal on back of good monsoon. Experts said that the rise in inflation, which is mainly on account of food inflation, may not dissuade the RBI to go in for at least a 0.25 percentage points cut in short-term interest rate in its monetary policy review on June 18. Inflation, as measured by the Wholesale Price Index (WPI), was 7.23% in April. In May last year, however, it was 9.56%. "I am confident that range of inflation would be around 6.5-7.5% throughout the year. I hope if monsoon is quite good, then it would be possible that this type of pressures would be sorted out," Mukherjee said. Overall food inflation rose to 10.74% in May, from 10.49% in the previous month. Food articles have 14.3% share in the WPI basket. The headline inflation number for March was revised upwards to 7.69%, from the provisional estimate of 6.89%. During May, manufactured inflation showed some easing and was at 5.02%. It was 5.12% in April. In the 'fuel and power' segment inflation rose by 11.53% on an annual basis. The rate of price rise was 11.03% in the previous month. "Notwithstanding the elevated inflationary expectations, concerns related to the moderation in economic growth may prompt the RBI to reduce the Repo Rate by 25 basis points in its policy," ICRA Economist Aditi Nayar said. Also Read Expert views on May inflation data Inflation accelerates to 7.55% in May