Inflation goes back into double digits

Runaway inflation, which was beginning to recede in the previous months after reaching to one of the highest levels, again touched the double-digit level in the eleventh month of the current fiscal year. According to the periodic report of Nepal Rastra Bank (NRB) based on data of 11 months, the inflation measured in consumer price index, shot up to 11.1 percent in mid-June from 10 percent in mid-May and 9.7 percent in mid-April. Inflation was at 7.4 percent in the same period of 2014/15. The rise in inflation belies the general expectations that inflation rate would follow the trend of continuous moderation seen from its peak of 12.1 percent in mid-January 2016. The unofficial blockade imposed by India from September 23 last year, which continued until the second week of February, is one of the reasons behind skyrocketing inflation until February. With the blockade coming to an end and supply system becoming normal, inflation was also moderating to single-digit. However, the surge to double-digit toward the end of the fiscal year has left the central bankers scratching their heads. "We were saying that the inflation was coming down to single-digit after the Tarai turmoil and blockade came to an end, resulting to normalization of supplies. However, the spiraling price hike has left us worrying,” a senior official of NRB said. The new inflation figure has come a day after the central bank unveiled its monetary policy for Fiscal Year 2016/17 which has set a target of containing inflation below 7.5 percent. Many economists doubt the central bank's ability to tame the inflation at such level at a time when the government has introduced an expansionary and distributive budget. Many also say that the central bank will have a tough time in maintaining price stability while the supply side disruption puts upward pressure in inflation rather than from the demand side. While the central bank has various monetary tools at its disposal to control price rise resulting from demand side, it cannot do anything to check the price that is determined from the obstacles in the supply chain. The rise in overall inflation was mainly due to double-digit growth in price of food and   beverage (11.9 percent), and non-food and services (10.5 percent). Source: Republica