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'Inflation may touch 14 per cent in Dec'

Amid reports that int'l crude oil prices may increase up to $170 a barrel, Assocham says the inflation may touch 14.5 pc by year-end.
PTI | By HT Correspondent, New Delhi
UPDATED ON JUL 08, 2008 08:38 PM IST

Amid reports that international crude oil prices may increase up to $170 a barrel, industry body Assocham said that inflation may touch 14.5 per cent by the end of this year.

The trickle down impact of hiked fuel prices will spill over to other commodities by the month of December. Coupling with low-base effect, inflation would peak to 14-14.5 per cent level. This could lead to further tightening of monetary policy pushing the already high interest rates to an upper level, Assocham said in its study on 'Inflation and Interest Rates'.

The report further said if the lending rates go up by another 50-100 basis points, non-food credit offtake may come down to 19-20 per cent in the present financial year and home loan growth may dip by 5-7 per cent.

Despite the increase in deposit rates effected since July, and negative sentiment in the equity markets, the current inflation may reduce the deposit growth to 20 per cent in 2008-09, the study added.

Home loans have suffered a double whammy of increasing interest rates and high property prices. With the upward revision, home loan rates and interest rates have almost doubled in the past four years, the chamber said.

The price rise, measured by the Wholesale Price Index, shot up well past the double-digit figure on June 7, when it touched 11.05 per cent. It has remained unabated touching a 13-year high of 11.63 per cent for week ended on June 21, despite the government and Reserve Bank's steps to cool the demand for commodities and increased supplies.

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