Inflation seen at 3.94%

I am back after a long silence as i was busy in my personal life and could not devote much time to the blog.

India’s wholesale price inflation rate is forecast at 3.94% for the 12 months to 18 August, its lowest in nearly 16 months, a poll of 11 analysts showed on August 30.

Annual inflation in the previous week was at 4.10%, and had last dropped below 4% in April 2006.

It would be the eleventh consecutive week that inflation has remained below 5%, the central bank’s target for the 2007/08 fiscal year.

Last month, the Reserve Bank of India raised banks’ cash reserve ratio to 7% from 6.50% in a bid to mop up excess cash that could fuel inflation.

The central bank held its short-term lending rate steady at the monetary policy review in July, as expected, after raising it five times since mid-2006.

This means that the rate cut that many banks have adopted will continue for some more time to time and lending rates may remain stable to a bias downwards.