By Naveed Naqvi
ISLAMABAD: Consumer prices unexpectedly rose in December and underlying inflation accelerated amid rising costs for fuel and food, indicating that the central bank will keep borrowing costs elevated in its next monetary review.
The consumer price index — a key indicator of inflation — rose 24.5 percent year-on-year in December. Prices were up 0.5 percent from the previous month, the statistics bureau said on Monday. In November, the CPI rise was 23.8 percent, year-on-year.
Food inflation quickened 35.5 percent year-on-year, while transport prices rose 41.2 percent, data showed. Clothing and footwear prices accelerated 17.1 percent and housing, water, and electricity costs rose by 7 percent.
The reading highlights that price pressures are more persistent than earlier anticipated. The central bank hiked interest rates by 625 basis points last year to tame prices and expects inflation to fall to 5-7 percent range by end of the next fiscal year ending June. The monetary authority will hold its next policy review on Jan. 23.
Prices have stayed in double digits since November 2021 amid supply disruptions due to the war in Ukraine and floods that ravaged the country. Authorities also raised fuel prices and power tariffs to meet key conditions to secure the International Monetary Fund bailout programme.
The country has been in the grips of decades-high inflation in the past few months but the CPI hike slowed down in September to 23.2 percent from a 49-year high of 27.2 percent in August.
The trend reversed the very next month when headline inflation rose sharply to 26.6 percent in October, prompting the central bank to raise the key policy rate by 100 basis points to a 24-year high of 16 percent in a decision it said was “aimed at ensuring that elevated inflation does not become entrenched”.
Inflation then eased marginally to 23.8 percent in November before rising again this month.
Core inflation increased to 14.7 percent year on year in December as compared to an increase of 14.6 percent in the previous month and 8.3 percent in December 2021.
Urban inflation increased to 21.6 percent as compared to an increase of 21.6 percent in the previous month and 12.7 percent in December 2021. Rural inflation increased to 19 percent as compared to an increase of 18.5 percent in the previous month and 8.9 percent in December 2021. On a month-on-month basis, it increased by 1.5 percent as compared to an increase of 2.1 percent in the previous month, and an increase of 1.1 percent in the corresponding month of last year.
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