per cent, giving RBI enough room to cut key rates to spur economic growth.
The wholesale prices-based inflation slipped 0.39 per cent in the week ended October 18, while it stood at 3.11 per cent in the year-ago period.
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. "However, I don't see any immediate decision on the rate cut."
Echoing similar view, HDFC Bank chief economist Abheek Barua said since inflation is on a decline, there could be a CRR cut of 50-100 basis points in the next few weeks.
"The RBI could also slash the repo rate by 50 basis points in the next few weeks. I expect single digit inflation figures by the middle to end of December," Barua said.
During the week, prices of food articles like pulses fruits and wheat declined. However, prices of vegetables rose by 2.3 per cent and spices by half per cent.
Inflation, which was 8.75 per cent as of June first week, suddenly jumped to two-digits after the government hiked the administered prices of petrol, diesel and LPG owing to high international crude oil prices.
Crumbling crude oil prices in the recent weeks, however, has led to 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.
In its mid-term review of the credit policy last week, RBI said inflation is expected to reach seven per cent by the end of this fiscal.
It would be the central bank's endeavour to bring down inflation to a tolerable level of below five per cent at the earliest, while aiming for convergence with the global average inflation of around three per cent in the medium-term, RBI had said.
Joshi said inflation is coming down sharply, more than expectations, mainly due to the sharp correction in global crude prices.
Softening crude is having its impact on the manufactured products as well. The category which has the highest weightage in inflation, declined by 0.1 per cent.
Among the group, prices of imported edible oil fell by four per cent, oil cakes by three per cent and groundnut oil by one per cent. However, khandsari and gur were dearer by four per cent and one per cent respectively.
Elsewhere, prices of texturised yarn were cheaper by four per cent, pvc resins by 14 per cent, benzene by two per cent, zinc by 11 per cent, basic pig iron and foundary pig iron by three per cent.
Besides, prices of zinc ingots metal bars and rounds softened by two per cent each and steel sheets by one per cent.
Meanwhile, inflation for the week ended August 23 was revised to 12.76 per cent from the provisional estimate of 12.34 per cent.
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