New Delhi: Headline inflation fell to an over two-year low of 6.55 per cent in January on cheaper food items, which may prompt the Reserve Bank to cut policy rates in the coming months.
Headline inflation, as measured by the Wholesale Price Index (WPI), had stood at 7.47 percent in December 2011. It was 9.47 percent in January last year.
The latest numbers are the lowest since December 2009 when headline inflation was at 7.15 percent.
On inflation, Finance Minister Pranab Mukherjee said that the rate of price rise was still not at an acceptable level and should fall further.
"I think it (inflation) should be further reduced since it is still not at acceptable level. I do hope (further) moderation will come," Mukherjee told reporters.
As per the official data released today, food inflation was (-) 0.52 percent in January against 0.74 percent in December.
Vegetables were cheaper by 43.13 percent and wheat by 3.48 percent on an annual basis. Potato and onion prices also fell by 23.15 percent and 75.57 percent year-on-year in January.
Food articles have 14.3 per cent share in the WPI basket and experts attributed the moderation in inflation to cheaper food articles.
Prices of manufactured items, which have a weight of around 65 percent in the WPI basket, went up by 6.49 percent year-on-year in January, as against 7.41 percent in the previous month.

Inflation in manufactured items has been high since February 2011, when it crossed the 6 percent mark.
Among manufactured items, iron and semis grew dearer by 18.46 percent and edible oil prices rose by 9.59 percent.

The cost of tobacco products moved up by 9.36 percent and basic metals became 11.99 percent expensive year-on-year.
Inflation in overall primary articles stood at 2.25 percent in January, compared to 3.07 percent in December, as per today's data.
Non-food primary articles, which include fibres and oilseeds also showed moderation to 0.55 percent in January, compared to 1.48 percent in the previous month.
Inflation in the fuel and power segment stood at 14.21 percent on an annual basis in January, against 14.91 percent in the previous month.
Meanwhile, inflation for November 2011 has been revised upwards to 9.46 percent from provisional estimate of 9.11 percent.
Experts said that the moderation in inflation will give more leeway to RBI to consider cuts in interest rates in the next few months.
Headline inflation was near double digit for most of 2010 and 2011. The apex bank hiked key policy rates 13 times, totaling 350 basis points between March 2010 and October 2011, to tame inflation.
India Inc has said the string of rate hikes, which have raised the cost of borrowing, have acted as a dampener to fresh investment and hindered growth.
As per the advanced estimates, Indian economy is projected to grow by 6.9 percent this fiscal, lowest in three years, on account of slowdown in manufacturing and agriculture.