Weekly inflation dips to 3-year low

Pace of price increase slows down for fourth straight week

KARACHI:

Pakistan's weekly inflation reading, called the Sensitive Price Indicator (SPI), hit a three-year low as it decelerated to 14.07% in the week ended September 5, 2024 compared to the same period of last year.

On a week-on-week basis, the short-term inflation rate decreased 0.15% on the back of a reduction in energy and food prices. Accordingly, the pace of increase in prices of essential commodities slowed down for the fourth week in a row, according to data released by the Pakistan Bureau of Statistics (PBS).

The deceleration in the SPI, coupled with the drop in the monthly Consumer Price Index (CPI)-based inflation to single digit at 9.6% after a gap of three years, further fueled expectations that the State Bank of Pakistan (SBP) would make a third consecutive cut in its policy rate in the monetary policy meeting scheduled for September 12.

Financial markets expect the central bank to slash the policy rate by 1-1.5 percentage points in tandem with the slowdown in inflation. The SBP's action will provide the much-needed boost to economic activities and growth in the country.

Earlier, the bank cumulatively reduced the policy rate by 2.5 percentage points in June and July, pushing it to 19.5%.

At present, the real interest rate (policy rate minus CPI inflation) stands at a high level of almost 10%. It must be reduced to shore up the economy with the business community demanding a steeper cut of five percentage points. The SPI comprises 51 essential commodities whose price data is collected by the PBS from 50 markets across 17 cities in the country.

During the week ended September 5, out of the 51 items, prices of 19 (37.25%) items increased, rates of 13 (25.50%) items decreased and prices of the remaining 19 (37.25%) items stood unchanged compared to the previous week.

The 0.15% decrease in week-on-week inflation was led by tomatoes, which cost 14.54% less at Rs111.81 per kg compared to Rs130.84/kg last week. It was followed by the price of chicken (farm broiler live), which dropped 1.55% to Rs426.08/kg compared to Rs432.81/kg in the prior week.

Wheat flour became cheaper by 1.31% to Rs1,761.37/20kg bag compared to Rs1,784.69/bag a week earlier. Chilli powder (200-gram pack of National) fell 1.30% to Rs320/pouch compared to Rs324.23/pouch in the previous week.

Hi-speed diesel price dipped 1.23% to Rs263.96/litre compared to Rs267.26/litre a week ago. Petrol edged down 0.68% to Rs260.31/litre compared to Rs262.09/litre in the prior week.

Prices of other essential commodities fell up to 0.59% including masoor pulse, sugar, mash pulse and cooking oil.