NEW DELHI: Increasing petrol and diesel prices pushed the wholesale price-based inflation to a 14-month high of 4.43 per cent in May, which, experts fear, may prompt the central bank to go for another rate hike in August.
The Wholesale Price Index (WPI) based inflation was recorded at 3.18 per cent in April 2018 and 2.26 per cent in May last year. Inflation in food articles category was at 1.60 per cent in May 2018, as against 0.87 per cent in the preceding month, government data said.
May inflation at 4.43 per cent was at a 14-month peak. The previous high was in March 2017, when the WPI inflation stood at 5.11 per cent.
Inflation in food articles rose 1.6 per cent and inflation in vegetables was up 2.51 per cent.
As per expectations, the ‘fuel and power’ basket led the inflation, which rose sharply to 11.22 per cent in May from 7.85 per cent in April. Domestic petrol and diesel prices recorded an all-time high in May.
The WPI inflation for March was revised upwards to 2.74 per cent from the provisional estimate of 2.47 per cent.
Data showed that retail inflation jumped to a 4-month high of 4.87 per cent in May on costlier food items such as fruits, vegetables and fuel, much higher than the central bank’s medium inflation target of four per cent.
Earlier this month, the RBI in its second monetary policy review for the fiscal, hiked interest rates by 0.25 per cent, the first hike in more than four years, due to growing concerns about inflation stoked by rising global crude oil prices as well as domestic price increases.
Experts claim that with US rate hike and domestic inflation rate, the RBI may go for another rate hike in August.
“With both core and headline inflation only likely to face greater upside pressure from various factors in the coming months, we continue to expect one more 0.25 per cent rate hike from the RBI. This could occur as soon as the 31 July-1 August meeting,” analysts at the French brokerage BNP Paribas said in a note.