CPI inflation rose to 8.6 percentage points in June from a year earlier, the Pakistani statistical office said in its monthly report published Wednesday. In motnh of May, the rate was 8.22 percent annually.
According to the data, urban CPI increased from 7.3 percentage points in May to 7.6 percentage points in June, while the rural consumer price index rose to 10.0 percentage points year-on-year, from 9.7 percentage points in May.
The national CPI average for fiscal year 20 was 10.8 percentage points, compared to 6.8 percentage points for fiscal 19.
According to an analysis by Intermarket Securities Ltd, the rise in CPI in June was mainly due to an increase in food inflation, while urban and rural core inflation (NFNE) continued to decline.
Read Also: SBP make visible reduction in interest rates
Urban core inflation fell to 5.7 percentage points in June, from 5.4 percentage points in May, while national core inflation fell to 5.8 percentage points the previous year, from 6.4 percentage points in the previous month.
The higher food inflation was caused by price increases for wheat / flour, potatoes, legumes, spices and herbs. This was offset by a fall in prices for tomatoes and onions. This led to a sharp rise in urban and rural food inflation to 12.9 percentage points year on year and 15.2 percentage points year on year, compared with 10.6 percentage points and 12.9 percentage points in May.
The CPI could have been higher if the traffic index had not declined 10.2 percentage points year-over-year, due to a drop in gas and LNG (city / country) prices by 13.0 percentage points / 11.5 percentage points year over year. )).
Inflation in the indices for housing, utilities and education remained subdued in June at 5.8% and 1.1% respectively for the urban curve (indicating a moderate decline in aggregate demand).
"Weak domestic demand should keep inflation low, even when supply shocks occur. With this in mind, SBP has revised its inflation target and expects NCPI for fiscal year 21 to be below the originally expected range of 7 to 9 percent
The 2019-2020 Pakistani economic survey referred to "a sharp rise in food inflation" due to a number of factors, including temporary disruption of perishable goods and higher transport costs.
The federal government also failed to meet its inflation target in the first year of power (2018-19) due to an increase in electricity prices and a devaluation of exchange rates that fueled inflation.
The Treasury believes that SBP uses core inflation when formulating its monetary policy. However, interest rates remained positive above 5.5% in the past fiscal year until the central bank started to cut rates.
The country closed double digits last fiscal year, although the COVID 19 outbreak weakened demand and depressed commodity prices.
However, in the Pakistani economic investigation, the Ministry of Finance found that there is also a risk of supply disruption.
Falling international commodity prices, especially crude oil, will help ease inflationary pressures. Supply disruption and hoarding to raise prices, ”said the Ministry of Finance's annual release.
