Similarly, core inflation, which excludes specific food and energy items to measure broader price pressures, also declined to 3.6 percent (July 2009) from 6.9 percent in January 2009. The downward trajectory of inflation was driven primarily by two factors: (1) base effects due to record-high prices of commodities last year and (2) relatively subdued demand.
This trend may have reached its trough in July, as inflation is expected to rise gradually during the remaining months of this year and the next, but still remain within target ranges for the policy horizon. Our external payments position continues to be manageable.