The drop is largely attributed to the cut in petrol and diesel prices effected on February 16, official sources said. Fuels and power have a 14.23 per cent weightage in the index.

Inflation is expected to moderate further in the coming weeks on account of a number of recent measures, including customs duty cuts earlier this year, and steps taken by the Reserve Bank to control money supply by raising the rate at which it lends short-term money to banks (repo rates) and also raising the amount of cash banks must statutorily keep with the RBI (cash reserve ratio).

The annual wholesale price index-based inflation was up 4.34 per cent for the week ended February 17, 2006, largely on account of a surge in the prices of iron ore, essential non-food items, industrial fuel, and manufactured items.