Inflation turns positive on pricey food

Rate Climbs To 0.12% After 13 Weeks, RBI Likely To Take Steps To Suck Out Excess Liquidity THE annual rate of inflation came in at 0.12% for the week ended September 5, ending the 13-week decline in the wholesale price index (WPI) as prices of food articles showed no signs of abating.      Inflationary pressures are beginning to build up, with retail inflation already in double digits. With the comfort of negative inflation for the most widelywatched WPI also gone, economists expect RBI to take steps to suck out excess liquidity from the system and even resort to selective credit control.      However, indications are that RBI is not likely to take any steps till there is more conviction about the economic recovery. Earlier this week, central bank governor D Subbarao had said, "We will not exit from the expansionary monetary policy unless we are sure that recovery is secured... But soon after the recovery is secured, we have to unwind the accommodative monetary policy." RBI has already factored in inflation touching 5% by the year-end.      The government, too, does not seem unduly worried about the overall inflation, though it is worked up about the sharp rally in food prices. Finance minister Pranab Mukherjee told reporters in the Capital that inflationary pressures in the economy are expected, and the inflation figures released for the week ended September 5 are in line with expectations. The Union Cabinet on Thursday extended the control imposed under the Essential Commodities Act by another year to October 2010 to address food price inflation.      According to Abheek Barua, chief economist at HDFC bank, the spike in food price inflation is triggered by inflationary expectations rather than supply-demand concern. The annual inflation for food articles has touched a decade high of 15.42%. "There is too much liquidity in the system now and the central bank is expected to go easy on open market operations to bring down liquidity. We are also expecting certain sector-specific credit control measures," Mr Barua added.  Rates may go up  by yr-end: Ranga  Interests rates may rise  marginally towards the end of FY10 as the economic situation is improving and demand is picking up, Prime Minister's Economic Advisory Council chairman C Rangarajan said in Hyderabad on Thursday, reports IANS. "Interest rates may harden a bit, not very much, towards the end of the fiscal," he said on the sidelines of a conference on the global economic meltdown.