(Click for a larger image)

If the prices continue at the long term trend levels we will see index levels of 245 in JFM 2010. That corresponds to the 2009 levels of about 228; inflation will be around 7.5% then. Will the RBI be pressured to raise rates?

Food price inflation has been around 15% already, and sugar prices have gone seriously up worldwide. Wheat, while decreasing worldwide, has held steady (despite a pretty good supply this year). And the dollar has stayed at the 48 levels, regardless of what people say is "liquidity" and "inflow". The RBI seems to be actively intervening - what else can explain the $5-6bn we add every week to the reserves. But in the face of rising inflation a weaker dollar will help since most commodities are marked to international prices. But again, will the RBI bite?

It's an inflexion point for the economy, in a number of ways.

Labels: Inflation

0 Comments:

Add a comment

Disclaimer: The author of this page is not a registered financial advisor, and you should not construe anything written here to be investment advise. You should consult a qualified broker or other financial advisor prior to making any actual investment or trading decisions. All information is a point of view, and is for educational and informational use only. No representation is being made that any investment made on the basis of data or information on this blog will result in profits. Te author accepts no liability for any interpretation of articles or comments on this blog being used for actual investments. In short: Apply your own thoughts before investing; I could be wrong. I do not accept responsibility for any losses incurred by interpretation of content in this blog. Further all content on this blog is free to view; no reader is expected to pay any amount as fee or any other consideration to me (the author) for reading my views.