Inflation drops to 7.38 per cent

RBI had hiked the CRR rate by 0.5 per cent to 5 per cent in two tranches to suck out Rs 8,000 crore of excess liquidity from the market. The first tranche of 0.25 per cent hike in CRR came into effect on September 18, having a positive influence on bringing down inflation by a substantial 0.42 per cent within a week. The second tranche of CRR hike by 0.25 per cent was to be effective from October 2 and its impact on inflation would be known in the coming weeks.

Even as crude oil prices shot up to a record $53 a barrel, the government has not allowed petroleum prices to be raised in a bid to check inflation. The point-to-point wholesale price index (WPI) inflation rate fell from the previous week’s level of 7.80 per cent even as manufactured items and fuel prices stood firm. The WPI also declined by 0.1 per cent to 189.1 points. It was 176.1 points in the previous year period.

According to analysts, inflation will come down further in October after the full effect of the CRR hike is felt. However, if oil prices continues to shoot up and if the government is forced to revise upwards the diesel prices, the falling trend in inflation might be arrested, analysts added.