Inflation rose marginally to minus 1.14 per cent for the week ended June 13 against --1.61 per cent in the previous week even as prices of food items like pulses, cereals, and fruit and vegetables increased compared to last year.
This is the second week in a row when inflation remained in negative territory.
The wholesale price index stood at 11.80 per cent during the corresponding week a year ago.
Low inflation is prompting banks to cut interest rates. On Wednesday, State Bank of India reduced the benchmark lending rate by half a percentage point, leading to cheaper home, car and corporate loans.
During the week, tea became expensive by 2 per cent and arhar by 1 per cent.
At the same time, fuel items like aviation turbine fuel surged by a whopping 12 per cent, light diesel oil by 10 per cent and furnace oil by 3 per cent.
Even though inflation is in negative territory, the RBI is likely to keep the interest rates unchanged.
The RBI is likely to maintain the status quo in its upcoming review of monetary policy next month, said HDFC Bank economist Jyotinder Kaur.
The Reserve Bank Governor had said that the central bank will be looking at reversing the expansionary policy at an appropriate time.
"I do not want to say we are going to do it right now or in the near future but certainly that is part of the agenda," he had said.
According to Crisil principal economist D K Joshi, "inflation is likely to remain in negative territory for the next two months and thereafter I expect it to rise sharply to reach 5 per cent by the end of this fiscal."
Year-on-year, the prices of cereals went up more than 13.7 per cent, pulses 17.06 per cent, and fruit and vegetables 10.22 per cent. At the same time, the prices of milk have gone up nearly 4.8 per cent over last year, while spices were more expensive, by about 8.08 per cent.
During the week, a manufactured product like coconut oil was expensive by 1 per cent, cotton yarn by 2 per cent, cycle tubes by 8 per cent and capsules other than vitamins and antibiotics by a whopping 58 per cent.