Headline inflation rate measured by the wholesale price index (WPI) fell to a nine-month low of 4.68 per cent in February on the back of a fall in food and fuel prices.
Food inflation cooled to 8.12 per cent in February from 8.80 per cent in the previous month.
The WPI-based inflation — which was until recently the main gauge of inflation — for January had come in at 5.05 per cent.
The cooling in both WPI and CPI inflation has clearly boost the chances of RBI Governor Raghuram Rajan keeping the policy rates on hold, say economy watchers.
Rajan has raised interest rates three times since he assumed charge of central bank in September last year.
The latest slide prompted the pro-growth brigade in both Government and industry to quickly make a case for the RBI to incentivise growth.
They say the softening trend in WPI inflation provides some headroom for the RBI to cut interest rates in the upcoming policy review on April 1.
The RBI is expected to be guided more by the consumer price index (CPI), which seems to have emerged as the new monetary policy anchor. Sticky retail inflation could weigh on the central bank’s policy action and prompt it to refrain from any rate cut, say some policymakers and economy watchers.