Inflation may cross all estimates

Bank-of-EnglandIn 2011, economists anticipate inflation rising further beyond expectations.

As per figures revealed by the Office for National Statistics (ONS) the consumer prices index (CPI) inflation rose to 3.4% in December from 3.3% the previous month.

Moreover, the Bank of England has anticipated that CPI would reach 3.5% in the beginning of 2011 due to rise in the prices of the commodities like oil, coffee, sugar, cotton and wheat and subsequently VAT will increase from 17.5% to 20%.

Since November 2009, inflation has crossed its target and it is expected that it will continue to rise further due to hike in the petrol prices and utility bills.

The target rate of inflation is 2% and economists at Barclays Capital are anticipating inflation to rise to around twice its target rate in the first quarter of 2011.

Another economists from JP Morgan calculate the CPI and came to a conclusion that CPI will reach a level of 4.2% in February.

Due to increase in the prices of non-food commodities, the shop price inflation rose to 2.1% in December from 2% in November but will continue to remain below CPI as reported by the British Retail Consortium and Nielsen.

Report also presents that commodity prices are being kept high by the global economic recovery though retailers are offering discount to keep the prices low and increasing demand from China, Brazil, India and Russia are helping to keep shop inflation price below CPI.

It's going to be a tough time for the Reserve Bank of India on January 25 when it announces its quarterly policy review because it has to meet the demands of economic growth along with the inflationary pressures, said by Duvvuri Subbarao.

Subbarao also said that lot of countries in the world are still facing deflation and we are the one who had recovered faster and inflation also caught up with us sooner than others.

While speaking to the students of the Indira Gandhi Institute of Development Research he also said that it is a challenge for RBI to standardize monetary policy by taking into account the demands of inflation management and the demand of supportive recovery.

Talking about food items, government is majorly concerned about continuous rises in the prices of food items. Due to rise in the prices of food items inflation has reached 8.43% in December last year. First week of January witnessed 16.91% rise in the food inflation.