Finally the much-awaited inflation numbers are here. It turns out that the fall in petroleum prices recorded by the statistics department and the neutralizing effect of previous months change in electricity costs offset the impact of volatile food prices - something that helped tame the headline inflation.
According to FBS data, CPI inflation, which had increased by 2.42 percent in January, eased to 0.39 percent during February, resulting in inflation of 13.04 percent, year-on-year, for the Jul-Feb period.
However, on a monthly basis, inflation might be on the higher side in March.
The heavy weight food inflation, which typically mirrors the weekly SPI inflation of the second week of preceding month to the second week of the month under consideration, might be substantially high in March as compared to February.
With no significant change in electricity prices and relatively stable oil prices in the year to-date, even if March CPI increased by one percent on monthly basis, the higher base effect would guide yearly inflation to around 12.5-12.7 percent in March.
This implies that the full-year number would likely come down to 11.5 -12 percent by June, as threats of second round of inflation and the scheduled increase in electricity prices in April, is expected to be mitigated by the high base affect.
The trimmed core inflation, which had surged abruptly by 230 bps to 12.7 percent during January, is back on a downward trajectory - rising by 12.4 percent last month.
On the other hand, non-food, non-energy inflation - unadjusted for volatility - kept on its smooth downhill journey towards 10.1 percent in February from 14 percent at the start of this fiscal year.
Now the question comes to mind, what does all this math mean? Well, low inflation in February certainly under voices a hawkish stance of monetary managers.
Yet it might not result a downward revision in the discount rate, on account of threats of second round of inflation and persistence reliance of fiscal financing on domestic sources.
Assuming that international oil prices will hover around $70-80 per barrel for the remaining fiscal year and that house rent index will continue to ease with no major upward push in food prices, headline inflation is likely to stay below 12 percent in the last quarter.
The materialization of the pending CSF inflows and IMFs bridge financing for fiscal purposes might satiate the governments appetite for money.
This, coupled with visible crowding out of private sector in the second and third quarter of this fiscal year, makes a strong case for a 50-bps reduction in discount rate in June.
However, those expecting a cut later this month would obviously be disappointed.
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