Wholesale price inflation dropped to a 10- month low of 2.76 per cent in January on the back of softer prices of fuel and some food items, increasing the prospect of a rate cut by the RBI in its April policy review.

Economists said the decline in inflation, both retail and wholesale, may provide further head-room to the central bank to cut interest rates (repo) in the coming months.

Wholesale Price Index (WPI)-based inflation stood at 3.8 per cent in December 2018 and 3.02 per cent in January 2018. The WPI inflation stood at 2.74 per cent in March 2018.

Inflation in kitchen essentials such as potato, onion, fruits and milk softened in January over the previous month.

“We expect wholesale inflation to remain in the range of 3.5 per cent by the end of the financial year and will be guided by recovery in the prices of food and manufactured goods. We expect oil prices to remain volatile (slightly towards the higher end) owing to removal of waivers granted by the US government on the Iran sanctions and probable supply cuts by Opec,” Madan Sabnavis, chief economist of Care, said.

The rate of price rise in the food basket, as a whole, rose to 2.34 per cent in the month under review compared with a deflation (-0.07 per cent) in December.