Inflation hits seven year high

The wholesale price index (WPI)-based inflation rate unexpectedly accelerated to a more-than-seven-year high at 8.75 per cent for the week ended May 31, surprising analysts and policy makers.
Current inflation rate is the highest since January 13, 2001, when it stood at 8.84 per cent. Inflation rate for the corresponding week last year was 5.09 per cent.
Finance Minister P Chidambaram termed the inflation as a "worrying" factor but said the government was confident of bringing down the price rise.
However, more worrying for the government is the fact that the latest surge in inflation is largely driven by rise in food prices.
Planning Commission deputy chairman Montek Singh Ahluwalia said today a good monsoon would strengthen the agriculture sector and bring down prices of commodities.
Analysts also apprehend that the Reserve Bank of India (RBI) may further tighten monetary measures before its quarterly policy review on July 29. The central bank on Wednesday unexpectedly raised repo rate by 25 basis points to a six-year high of 8 per cent, to keep a check on rising inflationary expectations.
The fact that the govt has failed to control inflation is a worring factor for the stock market and is likely to have a negative impact on monday and the future weeks to come.