"Inflation will hover between 4-5 per cent if supply side constraint persists," Finance Minister P Chidambaram said. Medium term moderations in inflation will set in only when supply constraints are addressed, he said.
"The constraints will be addressed once the new stock of sugar, new wheat come in," he said. When asked whether inflation which crossed the 5 per cent mark for the week ended September 30 will put pressure on interest rates, he said, "No, it would not as there is ample liquidity in the system."
The government's intention is to bring down inflation below 4 per cent the Finance Minister had said earlier. The Reserve Bank is due to come out with the quarterly review of the Monetary Policy later this month.
Chidambaram said that inflation crossed 5 per cent because of fuel and lighting components. "We are trying to find out the reasons behind price rise of these components as they generally do not vary so much," he said.
The prices of the two components rose during the week ended September 30 compared to corresponding figures last year, due to the rise in prices of the two components which, was a little exaggerated since the prices rose on a declining base last year.
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