The inflation rate, based on monthly Wholesale Price Index (WPI),  has jumped to a 14-month high of 4.43 per cent (provisional) in May against the backdrop of rising petrol and diesel prices as well as vegetables. In comparison, wholesale inflation was at 3.18 per cent for the previous month and 2.26 per cent during the corresponding month of the previous year.

According to data released on Thursday, food inflation in May was at 1.60 per cent compared to 0.87 per cent in the month of April. Vegetable prices have also gone up 2.51 per cent in May, compared with (-)0.89 per cent in the previous month. The rise in potato prices was sharp at 81.93 per cent compared with 67.94 per cent in April.

As expected, fuel and power’ basket jumped sharply to 11.22 per cent in May from 7.85 per cent in April due to the sharp rise in domestic fuel prices in line with global crude oil prices.

The jump in wholesale inflation has come following an increase in retail inflation that jumped to 4-month high of 4.87 per cent in May on costlier food items such as fruits, vegetables and cereals coupled with high fuel rates. Based on Consumer Price Index (CPI), the retail inflation was at 4.58 per cent in the preceding month, April. In May 2017, however, it was at a low of 2.18 per cent.

The RBI, which watches inflation rates very closely, especially CPI, raised its key lending rates in its latest policy review earlier this month by 0.25 per cent to 6.25 per cent. The key rates were hiked after more than four years following an increase in global domestic crude oil prices.

According to RBI CPI inflation is projected at 4.6 per cent in the first half (April-September) and 4.7 per cent in the second half (October-March). Belying expectations RBI, however, kept its stance neutral in tune with its objective of achieving the medium-term target for CPI inflation of 4 per cent within a band of (+/-) 2 per cent, for fuelling growth.

With inputs from PTI