The head­line in­fla­tion rate has risen to 12.6 per cent, up from 11.8 per cent in the pre­vi­ous month. The Cen­tral Bank, in its re­po-rate an­nounce­ment yes­ter­day, said re­cent da­ta re­leased by the Cen­tral Sta­tis­ti­cal Of­fice (CSO) showed head­line in­fla­tion, mea­sured by the 12-month in­crease in the In­dex of Re­tail Prices, rose to 12.6 per cent.

Food prices are large­ly re­spon­si­ble. "The high in­fla­tion in the food cat­e­go­ry of the in­dex con­tin­ued to pri­mar­i­ly re­flect move­ments in the prices of fruits and veg­eta­bles at the re­tail lev­el," the re­port said. "On a 12-month ba­sis, fruit and veg­etable prices rose by 41.4 per cent and 45.2 per cent, re­spec­tive­ly, in May (com­pared with 48 per cent and 34.3 per cent in April)."

With the ex­cep­tion of a slight dip in March, head­line in­fla­tion has been steadi­ly ris­ing since Jan­u­ary, when it was sin­gle dig­its (see graph). "When mea­sured on a month­ly ba­sis, the rate of in­crease in the over­all price lev­el was 0.3 per cent in May, com­pared with an in­crease of 2.8 per cent in April," the re­port read. Food prices-main­ly fruits and veg­eta­bles-were the main dri­ver of head­line in­fla­tion, ac­cel­er­at­ing to 28.3 per cent, up from 26.1 per cent in April.

The Cen­tral Bank said core in­fla­tion, which fil­ters out the ef­fect of food prices, mea­sured 2.2 per cent in the 12 months to May, the same rate as in April. The fig­ures al­so show "some slow­down" in the rate of growth of pri­vate-sec­tor cred­it. "On a year-on-year ba­sis to April 2012, pri­vate-sec­tor cred­it from the con­sol­i­dat­ed fi­nan­cial sys­tem grew by 1.3 per cent, slow­er than the 3.1 per cent record­ed in the pre­vi­ous month."

The re­port said among the ma­jor cat­e­gories of pri­vate-sec­tor cred­it, the val­ue of out­stand­ing loans to con­sumers de­clined by 0.5 per cent on a 12-month ba­sis, com­pared with a rise of 2.2 per cent in March. Re­cent da­ta al­so showed that busi­ness cred­it ex­pand­ed, though mar­gin­al­ly, grow­ing by 4.5 per cent in April, com­pared with 4.8 per cent in March.

Re­al-es­tate mort­gage lendi­ing re­mained strong, go­ing up by 10.4 per cent on a year-on-year ba­sis in April. There was some con­trac­tion in the ex­cess liq­uid­i­ty in the sys­tem for the third straight month to June. "In the first three-and-a-half weeks of June, com­mer­cial banks' hold­ings of ex­cess re­serves at the Cen­tral Bank fell to a dai­ly av­er­age of $2.2 bil­lion from $2.5 bil­lion in May, and $3.4 bil­lion in April.

The Cen­tral Bak said de­spite a sub­stan­tial pick-up in net fis­cal in­jec­tions ($1.4 bil­lion in June com­pared with $175 mil­lion in May), its op­er­a­tions re­moved $1.8 bil­lion from the sys­tem and kept ex­cess liq­uid­i­ty in check. The bank at­trib­uted the mod­er­a­tion in liq­uid­i­ty lev­els to an up­turn in short-term in­ter­est rates. The Cen­tral Bank has main­tained the re­po rate at three per cent. The next re­po-rate an­nounce­ment is sched­uled for Ju­ly 27.

In­fla­tion for the year to date:

Jan­u­ary 6.8 per cent

Feb­ru­ary .2 per cent

March 9.1per cent

April 11.8per cent

May 12.6per cent

Source: Cen­tral Bank month­ly re­po rate re­ports