Fuel prices to impact inflation, but it will be absorbed:FM

Mumbai, Jun 28 (PTI) Indian Finance Minister Pranab
Mukherjee on Monday said the the hike in prices of petroleum
products will have some inflationary impact in the short-term
but price pressures will moderate from the middle of July.
"There will be some impact (on inflation) in the short-
term, but it will be absorbed in the course of time,"
Mukherjee told reporters after a meeting with bankers and
chief ministers of western and central states.
To a query whether increase in inflation would prompt the
Reserve Bank to raise policy rates, Mukherjee said this
decision (on policy rates) is the prerogative of the central
bank, which will consider all factors in its July policy
review.
As inflation is already in double digits, some analysts
expect the RBI to tighten monetary policy by raising policy
rates. Some others, however, said the RBI may not do so before
its quarterly monetary review on July 27 as the system is
facing tight cash conditions due to over Rs 1 lakh crore outgo
on 3G and broadband spectrum sale and advance tax payment.
The finance minister said his economic adviser has told
him that there will be 0.9 per cent direct impact on
inflation. Besides, there will be cascading effect, he added.
"Overall inflation pressure, particularly on food
inflation, will be moderated from the middle of July and
we will have a moderate rate of inflation by end of this
year."
To a query, the Finance Minister said the decision to
hike the fuel prices will not have any impact on fiscal
deficit as the additional money does not go to the
Consolidated Fund of India, but oil marketing companies.
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