New Delhi, Oct. 30: Inflation slipped below 11 per cent for the first time in four-and-a-half months, which could give the Reserve Bank of India (RBI) some leeway to cut key interest rates and boost growth.

Data released today showed inflation had come down to 10.68 per cent for the week ended October 18 on lower prices of commodities and manufactured goods. Inflation had climbed to a peak of 12.68 per cent for the week ended August 9, fed by food, fuel and metal prices.

Yesterday, finance minister P. Chidambaram had held two rounds of meetings with RBI governor D. Subbarao and sources said, the credit market was among the issues discussed. Firms have been complaining of high interest rates, which they blame for choking industrial growth to 1.3 per cent in August.

DLF chairman K.P. Singh was among those who met Chidambaram, today, pleading for a rate cut to ease funding to industry. The three apex chambers — CII, Ficci and Assocham — have also been lobbying the government and the RBI for lower rates.

The chambers have been warning of loan defaults because high interest costs are eating into the margins of some segments. Economists feel that such a scenario is somewhat far-fetched but agree on high interest rates possibly playing a role in slowing down growth. The RBI has cut its economic growth forecast for fiscal 2008-09 to 7.5-8 per cent from around 8 per cent.

The RBI had recently reduced its repo rate and the cash reserve ratio (CRR) to push up growth. The repo is the rate at which the central bank gives loans to banks, while CRR is the proportion of a deposit which banks must keep with the RBI.

Bankers say there is scope for the RBI to cut the repo rate by at least another half per cent, especially since the US central bank had cut rates yesterday.

“There is pressure in the financial markets and the central bank will have to ease its monetary stance. The decline in inflation helps in doing just that,” said Professor N. R. Bhanumurthy, at the Institute of Economic Growth in New Delhi.