ISLAMABAD, March 19: The core inflation — non-food non-energy — has declined to 5.4 per cent in February 2007 from 8.2 per cent during the same month of the last year owing to tight monetary policy of the State Bank of Pakistan (SBP).

This sharp reduction in core inflation pushed down the overall inflation, which registered a healthy decline in the month of February, 2007 as against the corresponding month of last year.

The overall inflation declined to 7.4 per cent in February as against 8.05 per cent in the corresponding month of last year, according to the finance ministry fact-sheet issued here on Monday.

Tight monetary policy pursued by the country’s central bank is mainly responsible for secular decline in core inflation. Non-food inflation also exhibited the same declining trend – it stood at 5.6 per cent in February, 2007 as against 8.4 per cent in the same month last year.

Food inflation, on the other hand, has shown a trivial increase– it was 7.5 per cent in February, 2006 and has increased to 9.9 per cent in February, 2007.

During the first eight (July-Feb) months of the current fiscal year the average inflation stood at 8.04 per cent as compared to 8.42 per cent last year.

The non-food inflation declined to 6.47 per cent as compared to 9 per cent earlier and most importantly, core inflation averaged 5.9 per cent in the first eight months of the current fiscal as against an average of 9.1 per cent in the same period last year.

Food inflation on the other hand witnessed increase during the period. It was 10.3 per cent in the first eight months of the current fiscal as against 7.6 per cent in the same period last year.

The major contributor to the sharp pick up in food prices include the rise in the prices of pulses, milk, meat, chicken, potatoes, tomatoes, onion, beverages etc on account of imbalance in the demand and supply of these commodities.

With recent improvement in supply of these commodities their prices have started declining. With food inflation expected to decelerate and core inflation already trending downward the overall inflation target of 6.5 percent is likely to be achieved.