India inflation rises, reducing rate cut chances

Indian inflation rose in August to 7.55 percent on a 12-month basis, official data showed on Friday, further reducing the chances of an interest rate cut from the central bank next week.

The Reserve Bank of India will meet in Mumbai next Monday to consider its interest rate policy, which will also be influenced by a 12 percent rise in the price of diesel ordered by the government that will push inflation higher.

The Wholesale Price Index rose to 7.55 percent from 6.87 percent in July, which was a near three-year low.

The diesel price hike, announced late Thursday, was hailed by some as a sign of intent by the government that it is prepared to tackle difficult economic reforms and the widening hole in the public accounts.

Others saw it as a move that will spur inflation at a time when the economy has slowed dramatically and needs a boost from lower benchmark interest rates, which stand at 8.0 percent.

Despite the rising inflation, India's Sensex index jumped 2.46 percent to close at 18,464.27 points after the US Federal Reserve said it would unleash a bond-buying programme aimed at kickstarting growth in the United States.

The Indian government action to hike diesel also boosted sentiment as it will help lower its subsidy payments and raises hope for further reform ahead of a cabinet meeting Friday when foreign direct investment is expected to be discussed.

"The US Fed action and fuel hike were structurally strong enough reasons to lift sentiment," said Jagannadham Thunuguntla, head of research with SMC Securities.

Ajay Bodke, head of investment strategy with Mumbai's Prabhudas Lilladher, said markets cheered the fuel hike as the government "was signalling that it was serious about fiscal consolidation and reforms."

Though political parties have lashed out at the government over the price hike, Bodke said there is a growing feeling that the government will not roll it back.

The central bank has kept rates on hold since April -- when it cut them for the first time in three years -- insisting inflation must recede and the government curb its ballooning spending.

But other central banks around the globe have been easing interest rates to revive their troubled economies.

India's Planning Commission deputy chairman Montek Singh Ahluwalia said he hoped that the RBI and rating agencies "would take into account" measures taken last night.

He said the move to cut diesel and cooking gas subsidies had created "substantial" fiscal space for the RBI to act to stimulate economic growth, Dow Jones newswires reported.

Loading...

Editor’s note:Yahoo Philippines encourages responsible comments that add dimension to the discussion. No bashing or hate speech, please. You can express your opinion without slamming others or making derogatory remarks.

  • US ambassador recovers from knife attack praised by N. Korea
    US ambassador recovers from knife attack praised by N. Korea

    The US ambassador to South Korea, Mark Lippert, was recovering from surgery Thursday after having his face and arm slashed by a knife-wielding activist in an attack applauded by North Korean state media. The United States said it will never be deterred by "acts of violence" as the ambassador was rushed to hospital where his condition was described as stable after two-and-a-half hours of surgery that included 80 stitches to a deep gash on his right cheek. In a brief despatch, North Korea's …

  • Sy moves up, Villar enters Forbes list of billionaires
    Sy moves up, Villar enters Forbes list of billionaires

    Eleven Filipinos are included in Forbes’ 2015 list of richest people in the world. Filipino-Chinese tycoon Henry Sy Sr. continues to be the wealthiest man in the Philippines. The 90-year-old SM supermalls, banking and property tycoon ranked 73rd among the world’s richest with an increased net worth of $14.2 billion from $11.4 billion last year. Sy’s net worth was attributed to the continued growth of his SM Investments Corp. and his more recent venture, the City of Dreams Manila resort and …

  • New Moro rebel group emerges
    New Moro rebel group emerges

    A radical Muslim cleric trained in the Middle East and considered one of the leaders of the Bangsamoro Islamic Freedom Fighters (BIFF) has broken away from the terror group to form his own band of jihadists who are now reportedly providing sanctuary to bomb expert Basit Usman and at least five foreign militants, the military said yesterday. Armed Forces of the Philippines (AFP) spokesman Col. Restituto Padilla, citing reports from the field, said the Justice for Islamic Movement (JIM) was …

  • US billionaire says WWII Japanese ship found in Philippines
    US billionaire says WWII Japanese ship found in Philippines

    Microsoft co-founder Paul Allen said Wednesday he had found one of Japan's biggest and most famous battleships on a Philippine seabed, some 70 years after American forces sank it during World War II. Excited historians likened the discovery, if verified, to finding the Titanic, as they hailed the American billionaire for his high-tech mission that apparently succeeded after so many failed search attempts by others. Allen posted photos and video online of parts of what he said was the …

  • World's oldest person wonders about secret to longevity too
    World's oldest person wonders about secret to longevity too

    TOKYO (AP) — The world's oldest person says 117 years doesn't seem like such a long time. …

  • Australian drug smugglers being taken to Indonesian island for execution - media
    Australian drug smugglers being taken to Indonesian island for execution - media

    By Jane Wardell and Beawiharta SYDNEY/DENPASAR, Indonesia (Reuters) - Two convicted Australian drug smugglers were removed from a prison in Bali on Wednesday to be taken to an Indonesian island where they will be shot by firing squad, Australian media reported. The planned executions of Myuran Sukumaran, 33, and Andrew Chan, 31, have ratcheted up diplomatic tensions amid repeated pleas of mercy for the pair from Australia and thrown a spotlight on Indonesia's increasing use of the death …

  • Billionaire finds wreck of WWII ship in Phl
    Billionaire finds wreck of WWII ship in Phl

    Microsoft co-founder Paul Allen says he has found the Japanese Navy’s biggest warship at the bottom of the sea in the Philippines, 70 years after US forces sank it. Allen posted a photo on Twitter on Tuesday of the World War II battleship Musashi’s rusty bow, which bore the Japanese empire’s Chrysanthemum seal. The American billionaire, who has also pursued space exploration, said his luxury yacht and exploration ship, the M/Y Octopus, found the Musashi one kilometer (1.6 miles) deep on the …

  • Pacquiao big hit so far in Vegas sports books vs Mayweather

    LAS VEGAS (AP) — Manny Pacquiao has always believed he can do what 47 other fighters before him have failed to do — beat Floyd Mayweather Jr. in the ring. …

POLL

Should Aquino be held accountable over the Mamasapano operations?

Loading...
Poll Choice Options