By Staff Reporter
ISLAMABAD: Pakistan’s annual consumer price inflation eased slightly to 28.3 percent in January, the Pakistan Bureau of Statistics (PBS) said on Thursday, but remained well above the central bank’s target range of 23-25 percent for the fiscal year ending in June.
The inflation rate was marginally lower than the 29.7 percent recorded in December. On a monthly basis, inflation rose by 1.8 percent in January, compared with 0.9 percent in December.
The PBS said the main drivers of inflation were food and energy prices, which increased by 2.9 percent and 2.5 percent respectively on a monthly basis. Food inflation was led by higher prices of chicken, tomatoes, onions, eggs and fresh vegetables, while energy inflation was due to higher electricity tariffs and fuel charges.
Housing, water, and electricity, which contributes 24 percent to the CPI basket, rose 2.52 percent on a month-on-month basis and 38.65 percent on a year-on-year basis in January. The monthly increase was mainly attributed to an increase in the fuel charges adjustment in electricity tariff and the house rent index.
Transport, which accounts for 7.2 percent of the CPI basket, fell 2.36 percent on a month-on-month basis, but increased 26.15 percent on a year-on-year basis in January. The monthly decrease was due to a reduction in fuel prices, while the annual increase was due to a low base effect and higher taxes on petroleum products.
Core inflation, which excludes food and energy prices, also eased slightly in January. Core inflation in urban areas declined to 17.8 percent on a year-on-year basis from 18.2 percent in December, while core inflation in rural areas declined to 24.6 percent from 25.1 percent in the same period.
The inflation reading was in line with the government’s expectations, as the Ministry of Finance had projected inflation to remain high at 27.5-28.5 percent in January in its monthly economic update and outlook report on Wednesday.
Analyst said inflation was likely to remain elevated in February as well, due to expected increases in local fuel prices, electricity fuel charge adjustment and gas prices. However, inflation was expected to decline from March onwards, as the base effect of high inflation in the previous year would start to fade.
The State Bank of Pakistan (SBP) has kept its policy rate unchanged at record 22 percent since July 2023, citing high inflation.
Analysts said the SBP was likely to maintain its hawkish stance in the near term, as inflation remained above its comfort zone and the economic recovery was still fragile.
“The SBP will not be in a hurry to cut rates, as inflation is still high and there are risks of further supply shocks due to adjustment in energy prices,” said an analyst. “The SBP might consider easing its monetary policy in the second half of the fiscal year, if inflation showed a clear downward trend and the economic activity improved.”
Pakistan’s economy contracted by 0.2 percent in the last fiscal year and the the International Monetary Fund has projected a growth rate of 2 percent for the current fiscal year.
Copyright © 2021 Independent Pakistan | All rights reserved
