New Delhi Cheaper food products and some manufactured items dragged inflation to a 16-month low at 3.79 per cent for the week ended August 25, raising expectations of a softening monetary policy stance by the central bank.
The wholesale price index-based inflation, which stood at 3.94 per cent for the week ended August 18, has remained below four per cent for the second week in a row and is much lower than 5.27 per cent in the corresponding week of last year.
Inflation was lower than the latest figure during the week ended April 29, 2006 at 3.59 per cent.
This has fueled expectations of a softening monetary stance by the Reserve Bank as wholesale prices-based inflation has remained below its estimates for quite some time now.
RBI has projected inflation close to 5 per cent for the current fiscal and 4-4.5 per cent for the medium term.
"Some relaxation of tight monetary stance by RBI makes some sense as inflation is hovering below four per cent. It is only a question of timing now," Shashank Bhede of economic think tank NCAER said.
Finance Minister P Chidambaram had earlier said the government aims to keep inflation rate close to four per cent. He had also said there would be pressure on food prices until production of wheat, rice and pulses was stepped up.
According to analysts, prediction of normal monsoon has given rise to expectations of a fall in food prices in the coming months. During the first quarter of this fiscal, farm sector witnessed a growth of 3.8 per cent.
This indicated increase in supply of food items, which had been primarily responsible for the rise in inflation.
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