MUMBAI: An expected softening in the global food and crude oil prices is likely to bring down India's inflation significantly in Q4 FY 2009, Reserve Bank said in its quarterly review of monetary policy."Domestic food prices may soften in the months ahead... there is a possibility of a drastic reduction in the level of crude prices...

Against this background, it is expected that inflation would moderate from the current high-levels in the months to come and a noticeable decline in inflation can be expected towards the last quarter of 2008-09," RBI said in its policy review.

With a view to contain the double-digit inflation, which is hovering around 12 per cent, the apex bank today hiked the Cash Reserve Ratio (CRR) and the short-term repo rate by 0.25 per cent and 0.5 per cent respectively.Both CRR and repo rate has moved up by 1.5 per cent since April, while the short-term repo rate has risen by 1.25 per cent.

Announcing the policy, the central bank said it would strive to bring down the inflation from the current level of 11-12 per cent to a level close to 7 per cent by March 31, 2009."While the policy actions would aim to bring down the current intolerable level of inflation to a tolerable level of below five per cent as soon as possible and around three per cent over the medium-term.

..A realistic policy endeavor would be to bring down the inflation to seven per cent by March 31, 2009," RBI said.