New Delhi: Lower prices of food and fuel items pulled down inflation to 12.40%, offering hopes of what the finance ministry described as “early signs of moderation” in prices.

The decline in the rate of price rise by 0.23% from 12.63% in the previous week comes after five weeks of consistent rise.

“There are some early signs of moderation of inflation” the finance ministry said in a statement, adding that 21 out of total 98 articles in the primary articles group have shown decline in prices and there was no increase in prices of another 48 articles.

However, analysts say, the decline could be temporary as crop production could be hit due to flood in many states and implementation of the Sixth Pay Commission from next month would result in increased demand.

Inflation, which still remains much higher than the targeted 9% for the fiscal could prompt the Reserve Bank to further tighten monetary policy during the half-yearly review in October.

According to the ministry statement, during the week, prices vegetables declined by 1.1% while meat, egg and fish became cheaper by 0.2%.

Besides, falling crude in the international market cooled down prices of industrial fuels like naphtha by 9% and furnace oil by 6%.