Inflation ends lowest since June 2002 at 2.43%

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Inflation for the week-ended February 28 came in at 2.43% versus 3.03% week-on-week (WoW). This is the lowest inflation number since June 2002. In June 2002, inflation was reported at 2.18%; its lowest level is 1.13% for February 2, 2002.

The wholesale price index (WPI) for all commodities are marginally up at 227.7 (WoW). The WPI number for the week-ended January 3 has been revised to 5.33% versus 5.24%.

A CNBC-TV18 poll, conducted earlier, saw inflation coming in lower at 2.29%.

Shubhada Rao, Chief Economist at Yes Bank feels inflation in the coming weeks would play out of a base effect. She feels rate cuts would help improve investor sentiment.

Inflation now, said Rao, is a non-event as all eyes from the bond market perspective are shifting to the supply concerns where yields are telling the big story.

With respect to rate cuts by RBI, Rao said the markets would look more for RBI action on how we use, possibly, some unconventional methods of managing internal debt because clearly this year and the next fiscal government has indicated that fiscal deficit will be a concern for kick starting the economy. “So, the supply concerns will linger on going into the next year,” she said.

Rao added that rate cuts do help in improving the sentiment, but for its ultimate translation the bond yields also need to correct. “For that RBI possibly needs to look at more unconventional methods of managing internal debt,” she said.

Source : CNBC-TV18

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