Inflation falls to 11-month low at 5.07%; RBI may cut rates

Inflation dipped to a nearly one-year low of 5.07 per cent on falling prices of fruit and vegetables, a development which economists feel would prompt the RBI to cut rates further to boost the economy reeling under the impact of the global financial meltdown.

Inflation on Thursday dipped to a nearly one-year low of 5.07 per cent on falling prices of fruit and vegetables, a development which economists feel would prompt the RBI to cut rates further to boost the economy reeling under the impact of the global financial meltdown.

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Inflation, measured by movements in wholesale prices, dropped by 0.57 percentage points for the week ended January 24 from 5.64 per cent a week earlier, mainly on account of softening prices of food items like coffee and khandsari and metals products of iron and aluminium.

The previous low was recorded at 4.98 per cent for the week ended February 9, 2008, while inflation during the corresponding week last year was 4.8 per cent.

Having declined for 10 consecutive weeks, the rate of price rise moved up for two consecutive weeks to 5.64 per cent the next week, before resuming the southward march.

The downward trend in inflation is likely to continue following the decision of the government to reduce per litre prices of petrol and diesel by Rs 5 and Rs 2, respectively, and cooking gas by Rs 25 per cylinder from the midnight of January 28.

The inflation data, which relate to price rise for the week ended January 24, do not capture the impact of fuel price cuts, which will also have a cascading effect on the overall price situation.