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Sat 4 Oct 2008 11:04 AM

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India inflation eases to below 12%

Softening of inflation rate gives more leeway to central bank to keep interest rates on hold.

India inflation eases to below 12%
INFLATION EASES: Inflation in India has dropped to below 12 percent. (Getty Images)

India's inflation rate softened to below 12 percent to a three-month low, official data showed Friday, giving more leeway to the central bank to keep interest rates on hold.Annual inflation was 11.99 percent for the week ended Sept. 20, down from 12.14 percent the previous week, according to the Wholesale Price Index, India's most watched cost-of-living monitor.

The figure, a 13-week low, was below market expectations that inflation would remain above 12 percent but still far above the central bank's target of 7 percent for the fiscal year to March 31, 2009.

The government has forecast inflation will stay in double digits until January.

Inflation, stoked by a rise in energy, food and other commodity prices, has nearly tripled from a year ago.

Stubborn inflation is a key worry for the Congress-led government, which fears a voter backlash in elections due by May 2009 from India's masses who have been hardest hit by the price rises.

At the same time it fears aggressive monetary tightening by the central bank could brake economic growth too sharply and hurt efforts to ease poverty.

Analysts believe the central bank will leave monetary policy unchanged at its next meeting on Oct. 24 due to the current global financial turmoil.

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