Impact of fuel hike on inflation is temporary: Montek

NEW DELHI: Planning Commission Deputy Chairman Montek Singh Ahluwalia today said the spike in inflation following fuel price hike was on expected lines but the effect would even out in coming months.

"When you raise fuel prices it will show a little spike... I don't expect a continuing high inflation because of the fuel prices," he told reporters here after the Wholesale Price Index ( WPI) inflation rose to 9.44 per cent in June from 9.06 per cent in the previous month.

The high inflation is attributed to increase in fuel prices effected on May 24, besides seasonal factors and an upward movement in mineral and manufactured prices. High costs of crude oil imports have also affected prices.

Ahluwalia said that once the petroleum price increase effect is over, the level of inflation remains high but the rate depends on what how the prices behave in future.

When asked if the Reserve Bank could go for another round of rate hike, he said:"I would not speculate on what the RBI does".

It is widely speculated, both by economists and industry, that the central bank may hike interest rates by another 25 basis points during its July 26 credit policy review to tame the rising prices.

RBI has hiked interest rates by 250 basis points since March 2010 in ten tranches in its bid to curb inflationary pressures.