July WPI inflation surges to 5.79%; fuel, food costs rise

Updated: Wednesday, August 14, 2013, 12:27 [IST]

July WPI inflation surges to 5.79%; food, fuel costs rise

July WPI inflation has come in at a higher then expected 5.79 per cent, raising worries that the RBI may now find it difficult to cut interest rates going forward.

July core inflation has risen to 2.4 per cent, as against 2 per cent, month on month. The main reason for the rise in inflation was the fuel group inflation which rose to 3.4 per cent, month on month.

Non food articles index rose 0.9 per cent, month on month, while the Manufactured index inflation rose 0.6 per cent, month on month. However, a major reason for the WPI inflation rising was the rise in food inflation of 3.4 per cent. Food articles index has a weightage of almost 20 per cent in the WPI. Meanwhile, May inflation has been revised downwards to 4.58 per cent.

Stocks markets lost ground following the inflation data, with the Bank Nifty trading in the negative soon after the inflation data on worries that the RBI may have to keep interest rates on hold, following the jump in inflation.

The RBI has in the past few policy meetings left interest rates steady in a move aimed at helping inflation. On the other hand it has also drained liquidity from the banking system which is likely to affect the banking industry and dent margins.

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