inflation rises to 5.16% pm says not to worry

[birendra.trivedi]

Inflation crossed the 5% mark yet again after a gap of four weeks, touching 5.16% for the week ended September 30. The rise was due to dearer electricity, industrial fuel, food items and manufactured items.
Wholesale price-based inflation stood at 4.77% in the previous week and was 4.61% during the corresponding week in the previous fiscal. Inflation had last breached the 5% mark in the week ended August 26 when it stood at 5.01%.

Although inflation hit a 15-week high, finance minister P Chidambaram assured that there would not be any pressure on interest rates as prices would ease after fresh arrival of essential food items like sugar and wheat. “It will not as there is ample liquidity in the system,” he said.

There are concerns about a possible hike in benchmark interest rates when the reserve bank reviews the busy season credit policy on October 31.

“Inflation will hover between 4-5% if supply side constraint persists. The constraints will be addressed once the new sugar, new wheat come in,” he said.No Panic
• There will not be any pressure on interest rates as as there is ample liquidity in the system
• Inflation to hover around 4-5% if supply constraint persists. Once new sugar, wheat come, constraints will be tackled
• The government has indicated that it will not hesitate to take more fiscal steps to rein in inflation below 4%


Admitting that power and fuel have also become costlier, the finance minister said a proper assessment would be made to find the reasons underlying the price rise as they generally do not vary so much for these items. “I have asked the chief economic advisor to look into the matter,” he added. The government has indicated that it will not hesitate to take more fiscal steps to rein in inflation below 4%.

Prices of vegetables, cereals and pulses rose further during the week under review, while electricity, industrial fuels, edible oils and dairy products, iron and steel, tyre and tubes also became costlier.

The index for food articles group rose by 0.3% to 215.7, while fuel, power, light and lubricants group index shot up by 1.2% to 328.9 points. Manufactured products group index was up by 0.5% to 179.2 points due to rise in prices of food products, metals textiles, paper, rubber, chemicals, machinery and transport equipment.




pls throw some light guys whats ur view pls sahre ur views .

[altruismme]

thanks a lot for this file it gives abstruse information about the topic

[birendra.trivedi]

Inflation targets don't kill jobs, economies


Are central banks dealing with inflation as if they were hunting bears with a howitzer? The simple answer is no, though a growing number of academics will say otherwise.

Six industrialised nations and at least 20 developing ones use inflation targeting as the cornerstone of their monetary policies. Eight others, including the Federal Reserve, European Central Bank and Bank of Japan, unofficially target inflation, according to Morgan Stanley. Yet, the strategy is too restrictive, bordering on mechanistic, critics say. And by rigidly focusing on inflation, it ignores other central bank responsibilities, such as growth , employment and financial market stability.

“The struggle to meet rising food and energy prices is hard enough,” Joseph Stiglitz, a professor at Columbia University and the winner of the ’01 Nobel Prize in Economics, said in a recent paper. “The weaker economy and higher unemployment that inflation targeting brings won’t have much effect on inflation; it will only make the task of surviving in these conditions more difficult.”

The bottomline is: developing and developed countries should abandon inflation targeting, he said. Not so fast. With a target, a government or central bank identifies a specific inflation level or range it wishes to achieve and explicitly acknowledges that low and stable inflation is the paramount goal of monetary policy, said Fed chairman Ben Bernanke and Fed governor Frederic Mishkin in a 1997 paper they co-wrote .

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Other attributes of inflation targeting include stepped-up public communication of the bank’s aims and in increased accountability for attaining those objectives .

Anchoring monetary policy around a well-thought-out inflation target is better than none at all, which may leave markets confused. It helps to insulate a central bank from political interference, while enhancing its credibility. A target also provides explicit criteria against which to measure monetary policy and a central bank’s performance.

And it helps institutionalise sound policy. That hasn’t silenced the critics. “Inflation targeting can promote damaging mechanical policy making, as happened with money-supply targeting in the late 1970s,” Thomas Palley, head of the Economics for Democratic & Open Societies Project, wrote. Inflation-targeting central banks have tended to select a low target, when a slightly higher one may lead to “higher real wages, lower unemployment and possibly faster growth.”