Retail inflation fell to a new low of 3.66% in August due to a slower rate of price rise in vegetables, fruits and protein items, except pulses, which may prompt the Reserve Bank to cut rates at its September 29 policy meet.
Food inflation measured on Consumer Food Price Index during the month, however, rose slightly in August at 2.20% as against 2.15% in July 2015, government data showed on Monday.
Besides, the rate of price increase in vegetables was recorded at a negative 6.36% during the month under review, while fruits were cheaper with an inflation print of 0.99%.
In August 2014, retail inflation was at 7.03%.
The Consumer Price Index (CPI) based retail inflation for July 2015 was revised downwards to 3.69% from 3.78%, according to government data.
However, prices of protein rich pulses continued to rise at a higher rate with inflation for 'pulses and products' category remaining firm at 25.76%.
However, among other protein rich items such as meat and fish, the rate of price rise was slower at 5.79%.
Likewise, milk and its products were also cheaper in August than a year ago level at an inflation figure of 5.33%.
Among others in the list, inflation in eggs slowed to 2.3%, however, the rate of price rise for 'cereals and products' was faster with an inflation at 1.22%.
As per the data from the Ministry of Statistics and Programme Implementation (MOSPI), inflation in sugar and confectionery category slowed further to (-) 13.33%; 8.37% for spices and 4.43% for non-alcoholic beverages.
"We definitely expect one rate cut in September whether the Fed hikes rates or not. I think a lot of things have been factored in.
"I am not sure about just one cut coming from here. The way the world is moving and if you look at the similar kind of trajectory where the world is going now, we can definitely expect at least one or may be two more cuts," said Jayesh Mehta, managing director and country treasurer, Bank of America.