Inflation based on wholesale prices fell to a 10-month low of 2.76 per cent in January over the previous month on softening prices of fuel and some food items, according to government data released Thursday.

The Wholesale Price Index (WPI)-based inflation stood at 3.8 per cent in December, 2018, and 3.02 per cent in January 2018.

WPI inflation stood at 2.74 per cent in March 2018.

Inflation in kitchen essentials like potato, onion, fruits, and milk softened in January over the previous month, the data revealed.

However, the rate of price rise in the food basket, as a whole, rose to 2.34 per cent in the month under review compared to a deflation (-0.07 per cent) in the previous month.

The retail inflation, released earlier this week, too declined marginally to 2.05 per cent in January over the previous month on continued decline in food prices, including vegetables and eggs.

The WPI data further revealed that wholesale based price inflation for 'fuel and power' segment fell sharply to 1.85 per cent as against 8.38 per cent in December 2018, due to easing in prices of motor fuel and LPG.

Also, there was decrease in inflation in manufactured products basket in spite of higher in some items like sugar and apparel.

The Reserve Bank, which mainly factors in retail inflation based Consumer Price Index (CPI), had cut the key lending rate by 0.25 per cent this month.

The decline in inflation may provide further head-room to the central bank to cut interest rate (repo) in coming months, experts said.