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Food prices ease: is rate relief in sight?

India’s food inflation rate eased to 10.63% for the week-ended November 5, from 11.81% in the previous week, rekindling hopes that the price monster may well be on the verge of being tamed. HT reports. Ready to Smile

business Updated: Nov 18, 2011 02:14 IST
HT Correspondent

Is there light at the end of the inflation tunnel, finally?

India’s food inflation rate eased to 10.63% for the week-ended November 5, from 11.81% in the previous week, rekindling hopes that the price monster may well be on the verge of being tamed. But there is new fears: if the rupee weakens further, it an make crude and other imported commodities dearer, bringing back the spectre of high inflation.

The trend of falling inflation rate, if it sustains over a period, will offer cheer to policy makers battling between sliding growth and rising prices, giving them elbow room to ease interest rates. http://www.hindustantimes.com/Images/HTEditImages/Images/18-11-buz-04.jpg

“At least on the food front, we may expect to have some relief if this trend continues,” finance minister Pranab Mukherjee said.

Consumers, caught between the big squeeze of rising interest rates and higher cost of living, may also look for succour from the Reserve Bank of India (RBI), which may finally press the pause button on the policy of raising key rates, which it did to choke demand and cool prices.

The Reserve Bank has raised the signal policy rate 13 times in the past 19 months to tame inflation.

The latest data came on a day when the RBI released minutes of the last meeting of its advisory committee that showed that members of the panel had opposed a rate hike that took place six days later.

“On monetary measures, while one external member suggested an increase in repo rate by 25 basis points (0.25 percentage points), other five external members were of the view that repo rate should not be changed,” said minutes of the October 19 meeting of RBI's Technical Advisory Committee (TAC) on Monetary Policy.