Inflation rises to 11.63 pc, interest rates may go up further

Fri, Jul 4 07:56 PM

New Delhi, July 4 (PTI)Inflation has moved up to a new 13-year high of 11.63 per cent which may force RBI to further tighten money supply, besides prompting trade unions to press for higher interest rate on employees' provident fund at the EPFO meeting tomorrow. Despite attempts made by the Government to tame price rise, items like iron and steel, edible oils, cement, fruits, vegetables and cereals turned more expensive, driving up inflation from 11.42 per cent for the previous week.

It stood at 4.32 per cent in the corresponding week a year ago. To anchor inflation, the Reserve Bank is likely to increase short-term lending rate for banks, or repo, by further 25 basis points and the mandatory cash reserves of banks with central bank, or CRR, by another 50 basis points during the month, Crisil Principal Economist D K Joshi told PTI. A further tightening of money supply may force banks to further raise interest rates on various loan categories.

Unabated inflation may see interest rates also going up. This include interest rates on Employees Provident Fund.

In fact, the Employees Provident Fund Organisation is meeting here tomorrow to review the interest rates and trade unions said they would press for higher interest rates. While CITU National Secretary W R Varadarajan said his organisation would press for around 12 per cent interest rates for the current fiscal, A D Nagpal of HMS said the Government should give at least 10.5 per cent interest rates in view of soaring inflation.

Over four crore subscribers of EPFO got 8.5 per cent last fiscal. Meanwhile, RBI Governor Y V Reddy said in Britain that there is implicit recognition globally that a somewhat elevated headline inflation in the short-term, may be difficult ot avoid.

PTI.

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