Inflation dips to 10.68%, RBI may cut rates

It added hat there was a decline in prices of 6 essential items and prices of another 16 commodities remained unchanged.

The wholesale price-based inflation fell by 0.39 per cent to 10.68 per cent for the week ended October 18, while it was 3.11 per cent in the same period a year ago.

Analysts believe that the declining trend in rate of price rise could lead to easing of monetary policy by either cutting short-term lending rate (repo) or lowering of CRR—the mandatory deposit banks are required to keep with RBI.

Crisil Principal Economist D K Joshi said RBI could slash CRR by 100 to 150 bps, depending on the liquidity condition.

During the week, prices of food articles like pulses, fruits and wheat declined. However, vegetables rates rose by 2.3 per cent and spices by half a per cent.

Inflation had soared to two digits from 8.75 per cent in June first week after the government hiked administered prices of petrol, diesel and LPG owing to high international crude prices. The rate of price rise almost touched 13 per cent at 12. 63 per cent, a 16-year high, in early August.

However crude oil prices have crumbled in recent weeks, leading to a fall in prices of some industrial fuel, including furnace oil, which was cheaper by six per cent while prices of light diesel oil declined by three per cent.