Retail inflation, which the central bank tracks to set rates, eased to 3.66 percent in August from a revised 3.69 percent a month ago.
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INFLATION is expected to have slipped back to zero again when official figures for August are published this week. CPI food inflation marginally accelerated to 2.2 per cent in August from 2.15 per cent in July.
However, prices of protein rich pulses continued to rise at a higher rate with inflation for “pulses and products” category remaining firm at 25.76 per cent. Among other protein rich items such as meat and fish, the rate of price rise was slower at 5.79 per cent.
In the year to August 2015, food prices fell by 2.8% and prices of motor fuels fell by 12.9%.
Chief economic adviser Arvind Subramanian in a press conference conducted a fortnight ago had said: “We are closer to deflation territory and far away from inflation”.
A return to zero inflation today gave the Bank of England more reason to hold fire on interest rate hikes until well into next year.
Michael Martins of the Institute of Directors said that “given the strength of the United Kingdom economy, pickup in output, tightening labour market, and tentative signs of productivity increases”, the Bank of England should be prepared to follow the US Federal Reserve should it raise interest rates this week.
Economists say that the relatively strong pound will also have helped keep the price of imported food low and that there may also have been some downward pressure on inflation from summer clothing discounts last month.
CPI inflation was last negative in April, when the index shrunk 0.1 per cent year on year.
James Brown, a partner at consultancy Simon-Kucher & Partners, said there could be another bout of falling prices given the direction of petrol costs.
The Wholesale Price Index (WPI), an inflation indicator that measures the biggest basket of goods, fell 4.95 per cent last month compared with a year earlier, after slipping 4.05 per cent in July, the commerce ministry said.
“CII expects RBI to reduce interest rates by 50 basis points in the forthcoming policy with statements supporting further easing in the near future”.
“With inflation forecasts for next year sliding, the Bank is under no pressure to hike rates”.
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In July CPI stood at 0.1%, according to the figures from the Office for National Statistics (ONS).
