However, inflation is still way down the RBI’s projection of close to 5 per cent for the current fiscal.

In the previous week, inflation stood at 2.97 per cent. It was 5.45 per cent in the corresponding week last year.  The inflation data pertains to a period immediately after the Reserve Bank further tightened money supply in its mid-term policy review.

Interest rate cut
However, exact effect of the RBI move to ask banks to keep 0.5 per cent more cash with the central bank will be known later as it comes into effect during a fortnight from November 10. Analysts said any interest rate cut by RBI may not happen in the immediate future to spur demand despite low inflation because inflationary expectations are very high due to rising international crude and food prices.

Part of the increase in inflation is attributed to public sector oil firms’ decision to raise prices of aviation turbine fuel (ATF) by four per cent. This was the eighth increase in ATF prices this year, following the rise in global crude prices.

The Centre is yet to decide whether to increase prices of other petroleum products or compensate oil marketing companies through duty cuts or bonds.

In case, oil prices are hiked inflation will further head northward. Incidentally, global crude oil prices were ruling above $94 a barrel on Friday.