Inflation dips to 5-month low of 6.16%, raises rate cut hopes

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Inflation-dipsA moderation in vegetable prices helped to pull down inflation to a five-month low of 6.16 percent in December, raising hopes of a rate cut by the Reserve Bank later this month to boost sagging growth.

This is the slowest pace of price rise, as measured by the Wholesale Price Index, since July 2013, when inflation was 5.8 percent. In November, wholesale price inflation increased at the fastest pace in 14 months at 7.52 percent.

The moderation in December WPI figures comes on the back of easing prices of essential food items, including vegetables, cereals and protein-rich items.

Inflation in food articles, which has a 14.34 percent share in the WPI basket, was 13.68 percent in December, official data showed. It was 19.93 percent in November.

Inflation in vegetables declined to 57.33 percent in December from 95.25 percent in the previous month. This was driven by onion prices, which gained 39.56 per cent compared with a 190.34 per cent rise in November.

However, the rate at which potato prices rose was more than double at 54.65 percent in December over November.

Inflation in fruits and protein-rich items such as eggs, meat and fish stood at 9.07 percent and 11.40 percent, respectively. In milk, inflation increased to 6.93 percent.

With inflation declining, industry has clamoured for a reduction in interest rates. However, some experts said the central bank may keep rates on hold at its quarterly monetary policy scheduled on January 28.