Inflation down by 0.09%

Despite dip in food costs, overall inflation remains high, prompting policy speculation

KARACHI:

Inflation decreased by 0.09% in the week ending March 28, driven by a drop in food prices, marking the second consecutive week of deceleration compared to the previous week.

According to Pakistan Bureau of Statistics’ data, the weekly inflation rate remained slightly elevated at 29.41% in the reviewed week compared to the same week last year. Weekly inflation is measured through the Sensitive Price Indicator, which contains 51 essential kitchen items.

During the week, out of 51 items, prices of 04 (7.84%) items increased, 18 (35.30%) items decreased, and 29 (56.86%) items remained unchanged from the previous week. Tomatoes led the list of price drops on a week-on-week basis, decreasing by 12.04% to Rs92.71/kg. This was followed by wheat flour, dropping by 3.80% to Rs2,628.69/20-kg bag.

The prices of other commodities reduced by up to 2.59%, including garlic, LPG, onions, potatoes, bananas, pulse gram, and sugar. However, the prices of chicken, eggs, shirting, and rice Irri 6/9 increased by up to 5% in the week.

The year-on-year trend depicts an increase of 29.41%, with gas charges for Q1 making a heavy contribution to the 570% rise in its price. Other commodities increased by up to 86.05%, including chilli powder, onions, men’s sponge chappal, men’s sandal, garlic, gur, chicken, salt powder, sugar, energy saver, and pulse mash.

Finance Minister Muhammad Aurangzeb said on Friday that overall inflation is decelerating except for food prices, which are temporarily up due to Ramazan.

He hoped that food prices would soon normalise, and the inflation rate would maintain a downturn due to factors including the low base effect. The drop in inflation is expected to be followed by a cut in the benchmark interest rate, which currently stands at a record high of 22%.

Optimus Capital Management, Head of Research, Maaz Azam said the benchmark monthly inflation rate, measured through the Consumer Price Index, is estimated to slow down to 20.5% in March compared to the same month last year, “finally making the real interest rate (interest rate minus inflation rate) positive on a spot basis.”

However, MoM, inflation is projected to accelerate by 1.6% in March.

Published in The Express Tribune, March 30^th, 2024.

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