'CPI up 16% in December'

Pakistan's consumer price index rose 16% year-on-year in December due to rising food prices, a Reuters poll shows.

KARACHI: Pakistan's consumer price index probably rose 16 percent year-on-year in December due to rising food prices, almost the same pace of inflation as in the previous month, a Reuters poll shows.

The index rose 15.48 percent in November.

"The main reason for the rise in inflation year-on-year is  the low base effect along with the increase in food prices,  which rose around 10.9 percent in December 2009 year-on-year,  and expected to rise around 20 percent in December 2010," said Asif Ali Qureshi, director at Invisor Securities.

Food prices have been increasing following summer floods, which are estimated to have cost Pakistan's economy nearly $10  billion. Analysts, however, said food prices may have declined  month-on-month and inflation could have peaked in December.

The central bank is due to announce its monetary policy for the subsequent two months in January and analysts said it could increase its key policy rate on concerns of increasing government borrowing from the State Bank of Pakistan.

The State Bank of Pakistan in November increased its key policy rate by 50 basis points to 14 percent, its third consecutive rate rise in the past six months as it seeks to curb persistent inflation.

"Money supply growth is already on route to double digits and has been depicting a sharper increase in the second quarter of fiscal year 2010/11, with government borrowing being a prime driver, taking no heed despite continuous monetary tightening," said Farhan Bashir Khan, an analyst at Invest Capital Investment Bank Ltd.

"We expect further tightening through discount rate hike as imminent in upcoming monetary policy."

CPI forecasts for December (Percentage change vs year ago)

Silkbank AKD Securities Ltd Topline Securities Ltd Invest Capital Investment Bank Invisor Securities Ltd Invest and Finance Securities Ltd Meezan Bank NIB Bank Global Securities Standard Chartered Bank Faysal Asset Management Ltd Median

15.65 15.75 15.9 15.91 16.0 16.0 16.0 16.1 16.2 16.5 16.7 16.0