Economists see inflation dipping below the psychological 10 per cent barrier by end-December and falling further in Q4 FY 09 to hover around the 7-8 per cent mark by March.
However, notwithstanding the declining trend being witnessed presently, they warn that inflationary pressures still exist in the economy and the Reserve Bank would continue targeting inflation in the medium-term.
"I see inflation at sub-10 per cent levels by end-December-January. Going by present trends, it should be in single digits in Q4 FY 09," Bank of Baroda (BoB) Chief Economist Dr Rupa Rege Nitsure told PTI here.
Inflation declined to 11.80 per cent for the week ended September 27 from 11.99 per cent in the previous week.
"It is a volatile period we are going through. Oil prices are declining but the Rupee is (simultaneously) weakening. We will have to see what the net impact will be. Things are still uncertain but by the year-end, I think inflation will fall to the 10 per cent level," IDBI Gilts' Economist Amol Agrawal said.
Though on a downward curve, economists warn of inflationary pressures still existing in the system which might prevent the Reserve Bank from going in for rate cuts over the next 3-months.
"The RBI is targeting an inflation level of 5-5.5 per cent. If, however, it continues to remain in double-digits till January, then the tight monetary policy would continue," Crisil Director and Principal Economist D K Joshi said.