China's inflation moderates in Feb

IMPROVED OUTLOOK

Given the current economic climate, Lu predicted inflation in the next couple of months would remain at around 2.3 percent to 2.5 percent, way below the 3.5-percent cap set by the government.

Echoing his words, Lin Qiaoji, analyst from ABC International, forecasted the CPI would be held below 2.5 percent in the next few months.

The subdued inflation, while ensuring people's wellbeing, will also be supportive for the central government implementing macroeconomic policies, especially monetary policies.

"A couple of months ago, the market was deeply worried that the central bank would be forced to tighten liquidity if CPI approaches the official cap," Lu said. "Now, the low inflation could be good news for markets as monetary tightening is definitely not justified."

In addition, the PPI, dragged down by the dampening domestic demand amid economic slowing, is also likely to improve in the next few months.

Lin predicted the contracting PPI to be relieved as new orders from the United States and European market would stimulate the sluggish production.

China's PPI has been in deflationary territory for 24 consecutive months, the longest drop since the 1990s, according to the NBS.