Mumbai, Sep 16: The latest petrol price hike effected by the oil marketing companies will marginally add to upward pressures on headline inflation, the Reserve Bank of India (RBI) said Friday in its mid-quarter review of the monetary policy.
‘Oil marketing companies raised the price of petrol by Rs.3.14 per litre with effect from Sep 16, 2011. This will have a direct impact of 7 basis points to WPI inflation, in addition to indirect impact with a lag,’ the RBI said while hiking repo rate by 25 basis points.
The repurchase rate (repo), or the interest the central bank levies on short-term borrowing by commercial banks, has been raised to 8.25 percent from 8 percent.
Automatically, the reverse repurchase rate, or interest on short-term lending, gets hiked to 7.25 percent from 7 percent, since the central bank felt inflation levels remain well above its comfort zone.
Headline inflation based on the wholesale price index (WPI) nudged double digit levels at 9.8 percent in August, rising from 9.2 percent in the previous month.
Inflation in respect of primary articles and fuel groups also edged up in August.
Petrol prices were hiked for the 10th time since June 2010 from Friday as India’s oil retailers sought to pass most of the burden of the falling value of the rupee and high crude prices on to consumers.
The fuel hike comes against the backdrop of the Rupee’s value falling below 48 to a dollar for the first time in almost two years, while global crude prices — especially the Indian basket — hovered around $111 a barrel in the first fortnight of September.
The RBI said high crude prices were a cause for concern because of the impact it can have on inflation in the country.