By Staff Reporter
ISLAMABAD: Inflation in Pakistan jumped in March to its highest in almost six decades, driven by skyrocketing food and fuel prices, statistics bureau data showed on Saturday, putting pressure on the central bank to hike rate aggressively at a meeting due next week and to keep tightening policy in the months ahead.
Consumer inflation rose 35.37 percent from a year earlier, compared with a 31.55 percent increase in February and 12.7 percent in March 2022.
On a month-on-month basis, Consumer Price Index-based inflation increased to 3.7 percent.
The statistics bureau said the number was the highest-ever year-on-year increase recorded by the bureau since monthly records began in the 1970s. “This is the highest-ever inflation recorded in the data we have.”
The latest print bolstered the case for State Bank of Pakistan to raise the target rate at a review scheduled April 4 in line with the International Monetary Fund demand of at least 200 basis points.
“This is the highest year-on-year inflation since the available data i.e. July 1965,” brokerage Arif Habib Limited (AHL) said in a market note. “This takes 9MFY23 average inflation to 27.3 percent compared to 10.8 percent in 9MFY22.”
Transport prices climbed up 54.94 percent while food inflation quickened 47.15 percent in March from a year earlier, data showed. Clothing and footwear prices accelerated 21.93 percent and housing, water and electricity costs rose 17.49 percent.
Analyst Arsalan Siddiqui at Optimus Research said inflation is expected to stay in the current range at least for the next two months.
“It will recede from June onwards due to high base effect.”
Siddiqui said the significant spike in food inflation was led by an increase in wheat prices. “Moreover, the Ramadan factor also contributed to hiking fruit prices… The transportation index was driven by a significant hike in auto rates in March, alongside an increase in the POL prices.”
The government data showed CPI inflation in urban areas increased to 33.0 percent year-on-year in March as compared to an increase of 28.8 percent in the previous month and 11.9 percent in March 2022.
On a month-on-month basis, it increased to 3.9 percent in March 2023 as compared to an increase of 4.5 percent in the previous month and an increase of 0.7 percent in March 2022.
The CPI inflation in rural areas increased to 38.9 percent on a year-on-year basis in March 2023 as compared to an increase of 35.6 percent in the previous month and 13.9 percent in March 2022.
On a month-on-month basis, it increased to 3.5 percent in March 2023 as compared to an increase of 4.0 percent in the previous month and an increase of 1.0 percent in March 2022.
The SBP in its last policy meeting in early March raised its key interest rate by 300 basis to 20 percent, its highest level since October 1996. The SBP had brought forward its Monetary Policy Committee meeting from an original date of March 16, with analysts saying the rate hike was a key requirement to get the IMF funding released.
They expect a further 200bps of hikes in the next week to meet the IMF key condition for release of stuck up $1 billion bailout financing.
Copyright © 2021 Independent Pakistan | All rights reserved
