India's Inflation Slows for a Third Week


India's inflation slowed for a third straight week, signaling that the central bank's three interest-rate increases since early June are beginning to work.

Wholesale prices rose 12.1 percent in the week to Aug. 30 from a year earlier, the commerce ministry said in New Delhi today. That compared with a 12.34 percent gain in the previous week and the median 12.01 percent forecast in a Bloomberg News survey of 22 economists.

India's economy grew 7.9 percent in the three months to June 30 from a year earlier, the weakest pace since the last quarter of 2004. The central bank's next monetary policy statement is due Oct. 24.

Declining oil and commodity prices are helping cool inflation across Asia and easing pressure on the region's central banks to keep increasing interest rates. Consumer prices in China rose 4.9 percent in August from a year earlier, the smallest gain since June 2007. Japan's wholesale inflation rate fell for the first time in 11 months.

India's inflation has eased since reaching a 16-year high of 12.63 percent in the week to Aug 9.

Prices of rice, corn, onions, potatoes, spices and edible oils declined in the week to Aug. 30, today's report showed. Manufactured-price inflation, with a 64 percent weight in the inflation basket, rose 11.07 percent, slower than the 11.28 percent gain in the previous week.

Elevated energy and commodity prices forced the central bank in July to raise its inflation forecast for the year to March 31 to 7 percent from a previous target of between 5 percent and 5.5 percent.

The government may revise today's preliminary wholesale- price estimate in two months after receiving additional data. The commerce ministry today raised its inflation estimate for the week ended July 5 to 12.19 percent from 11.91 percent.


TradingEconomics.com, Bloomberg
9/15/2008 7:54:44 AM