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Low inflation may prompt rate cuts by banks

Inflation slipped to 0.13 per cent for the week ended May 30, the lowest ever in over three decade, a development that could hasten the process of rate cuts by the banks.

india Updated: Jun 11, 2009 14:38 IST

Inflation slipped to 0.13 per cent for the week ended May 30, the lowest ever in over three decade, a development that could hasten the process of rate cuts by the banks.

While the wholesale price index stood at 0.48 per cent in the previous week, the rate of price rise was 9.32 per cent during the corresponding week a year ago.

Even though inflation declined during the week, the prices of essential food items like vegetables, eggs, pulses and spices became more expensive.

This is the 13th week in succession when inflation stood below one per cent. Analysts feel that inflation could slip into negative territory in the days to come.

“We may see inflation in the negative territory which may continue till October with the lowest inflation level at minus 1.5 per cent in July,” said HDFC Bank Economist Jyotinder Kaur.

In a bid to spur economic growth, Finance Minister Pranab Mukherjee prodded public sector lenders to provide credit at reasonable rates.

In his address to chief executives of the public sector banks yesterday, Mukherjee said “as a financial intermediary the banks have to stand by to provide credit at reasonable rates.”