Reaching untouched heights step by step, inflation has again jumped a big step to 11.05 per cent for the week ending on June 7 after an 8.75 per cent in the preceding week. Fuel price rise announced on June 4 pushed the inflation rate to this 13-year high level. Earlier, a high inflation of 11.11 per cent was witnessed on May 6, 1995.

Chidambaram revealed that he had warned the Union Cabinet on the effect fuel price rise would have on inflation but it could not be avoided. A visibly concerned FM said, “These are difficult times. Government is aware of people’s difficulties, but fuel price hike was unavoidable.”

He said, “Inflation is high. RBI must take steps and it has taken.”

Sensitive BSE index of stock markets slipped about 350 points as soon as the data is released. The dipping of 350 points reflects the nervousness of the investors about the efficacy of the measures being taken by the Finance Ministry and the Reserve Bank of India.

Leading economists and analysts predicted that food price rise would prompt the Reserve Bank of India to further tighten the monetary policy, possibly by making short term lending to banks costlier.

This could further lead to increase in interest rates for cars, homes and consumer finance, economists said and feared that present situation could also force a hike in lending rates for the industry and many banks are already contemplating hiking the prime lending rate.

“The high inflation may force the RBI to increase the repo rate (short term lending rate to banks) by up to half a percent,” Principal Economist of rating agency CRISIL D K Joshi said.

He further stressed that unless fuel prices are controlled the prices would be a major challenge.

The previous high in the UPA regime was 8.33 percent, as per the provisional figure for the week ended August 28, 2004.

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