January inflation to ease slightly but stay above target: ministry

By Staff Reporter

ISLAMABAD: Pakistan’s headline inflation is expected to ease slightly in the next two months after hitting a near 30 percent in December, but will remain well above the central bank’s target range, the finance ministry said on Wednesday.

The ministry’s monthly economic update forecast inflation to be between 27.5 percent and 28.5 percent in January and 26.5 percent and 27.5 percent in February, down from 29.7 percent in December.

“In January FY2024, there is a slight moderation in the inflation outlook compared to the preceding month,” the report said.

However, the ministry warned that inflationary pressures remained high due to the soaring prices of perishable items, such as onions, tomatoes and chicken, which were affected by weather disruptions, export demand and input costs.

“The elevated prices of perishables and vegetables, coupled with increased utility costs (electricity and gas), have contributed to the inflationary pressure.”

The central bank has kept its key interest rate at 22 percent since July 2023, revised its inflation projection for fiscal year 2024 to 23-25 percent from 20-22 percent in its latest monetary policy meeting earlier this month.

The government has taken some steps to ease the supply situation of perishables and chicken, such as reducing onion exports by increasing the minimum export price and lifting the ban on soybean imports, the ministry said.

Though, it acknowledged that challenges persisted in the form of supply chain disruptions and increased utility prices, which could offset the benefits of lower fuel costs.