Theinflation rate for the week ended May 26 touched 4.85 per cent, going below the 5 per cent mark for the first time in ten months and raising prospects of RBI policy relaxation that could result in lowering of interest rates, especially in the housing sector.In a recent speech, RBI Governor Y V Reddy had said, “We at RBI have articulated that tolerance limit of inflation is around five per cent.” After touching 5.06 per cent the previous week, inflation fell chiefly because the wholesale price index of primary articles declined by 0.3 per cent. There was no change in the index for manufactured goods, fuel, power etc. Food articles, which carry 22.02 per cent weightage in WPI, declined by 0.5 per cent, but non-food articles rose 0.2 per cent.Economists believe the decline in inflation was expected and is a result of combined steps taken by RBI and the government — interest rate hikes, customs duty reduction, ban in futures trading of essentials.Deputy Chairman of the Planning Commission Montek Singh Ahluwalia said the drop had occurred earlier than expected. He attributed the decline to the government’s “multipronged programme” undertaken after inflation touched a two-year high of 6.69 per cent in January this year.
