New Delhi, Dec 15: A sharp fall in vegetable prices brought food inflation to a near four-year low of 4.35 per cent for the week ended December 3, raising hopes that RBI may halt the rate hikes in the monetary policy review tomorrow.
Buoyed by the steep decline in food prices, Chief Economic Advisor Kaushik Basu said food inflation may go down below 3 per cent in a month's time. “I expect by the first week of January food inflation will go down below 3 per cent.”
The latest weekly food inflation number is the lowest since the week ended February 23, 2008, when it was 4.28 per cent.
Food inflation stood at 6.6 per cent in the previous week and 10.78 per cent in the corresponding period last year.
Experts hope that the softening food prices, along with moderation in headline inflation, will have a sobering effect on the Reserve Bank of India, which has adopted a tight monetary policy stance since March 2010 to check price rise.
“Headline inflation is expected to moderate further to around 8 per cent in December, from 9.1 per cent in November, as easing food price inflation would offset the impact of the recent rupee depreciation,” ICRA Economist Aditi Nayar said.
“The RBI is expected to leave the repo rate and the CRR unchanged in the upcoming mid-quarter policy to continue to dampen inflationary expectations,” Nayar said.
In its October reveiw, RBI had hinted that it may not hike rates if inflation situation does not worsen.