New Delhi, Jan. 1: Inflation fell to 6.38 per cent for the week ended December 20 as demand slowed and oil prices eased, raising hopes of further cuts in interest rates by the Reserve Bank of India. Inflation dropped to its lowest since early March. It was 3.74 per cent in the corresponding period a year ago.

Officials said an interest rate cut was likely. “I don’t know why the RBI is hesitant in cutting the interest rates,” said N.R. Bhanumurthy of the Institute of Economic Growth.

He said the trend indicated that inflation would fall further. The central bank should step up monetary measures for the fiscal initiatives announced by the government to be effective.

According to D.K. Joshi, principal economist with rating agency Crisil, “The RBI could cut the repo and reverse repo rates by 100 basis points. This could happen in the monetary policy statement or earlier than that.” The government, too, had made a strong case for a rate cut, in its mid-year review of the economy,

During the week under review, prices of tea declined 3 per cent, fruit and vegetables and spices by one per cent each, and pulses 0.5 per cent.

Cement price was down marginally by 0.2 per cent. Steel slipped 11 per cent, pig iron 6 per cent, and bars and rounds by 4 per cent each. The index for the textile group declined 0.1 per cent on account of lower prices of synthetic yarn. Newspaper prices rose 2 per cent, gur 3 per cent and oil cakes 1 per cent.