Inflation plunged to a 14-month low of 4.03 per cent for the week ended June 16, raising hopes of an easing of monetary measures by the Reserve Bank of India in coming months.
RBI Governor YV Reddy said the slowdown in inflation and its macroeconomic impact was being analysed.
In its slack season credit policy last month, the RBI had pegged the average annual inflation rate for 2007-08 at 5 per cent and said it would be in the range of 4.0-4.5 per cent over the medium term.
With a series of interest rates hikes in quick succession the RBI has aggressively tightened the monetary screws and the government has cut import duties on several items, including cement and edible oils.
The wholesale prices-based inflation rate fell for the 10th consecutive week from the previous week’s level of 4.28 per cent as lower prices of essential items and a relatively high base during the corresponding week of the previous year pulled the price line down.
Inflation was 5.5 per cent in the corresponding week of 2006.
Finance Minister P Chidambaram said in London recently that fiscal and monetary tightening measures had helped moderate the rate of inflation.