SPI inflation hits eight-week high

The weekly inflation reading hit an eight-week high at 15.15% in the week ended October 24 as compared to the same week of last year due to a hike in food prices, according to the Pakistan Bureau of Statistics' (PBS) data released on Friday.

Food inflation is on the rise ahead of a central bank meeting to consider making a fourth straight cut in its key policy rate in the first week of November. The hike in food prices may, however, encourage the bank to make a moderate reduction in the rate instead of a steeper cut of about 200 basis points being anticipated by capital markets.

The trend in food and energy prices over the next week will play an important role in guiding the bank to take an astute decision on interest rate revision in its monetary policy meeting scheduled for November 4.

However, on a week-on-week basis, the rate of inflation ticked down 0.22% in the week under review compared to an uptick in the previous week, according to the PBS.

The year-on-year (YoY) trend depicts an increase of 15.15%, led by Q1 gas charges, which surged 570% to Rs1,976.50/mmbtu compared to the same week of last year.

It was followed by gram pulse becoming costlier by 82.50% at Rs415.58/kg compared to the corresponding week of the previous year.

Similarly, the price of onions surged 50.25% to Rs147.58 on a YoY basis, while chicken rose 39.12% to Rs433.84/kg. The price of moong pulse increased 36.94% to Rs376.61/kg compared to last year. Prices of other essential commodities rose up to 25.5% including powdered milk, beef, shirting, cooked daal, garlic, georgette and ladies' sandals.

PBS measures the weekly inflation through the Sensitive Price Indicator (SPI), which comprises 51 essential items. It collects price data from 50 markets across 17 cities in the country.

During the week, out of the 51 items, prices of 13 (25.49%) items increased, 10 (19.61%) items decreased and 28 (54.90%) items remained unchanged compared to the previous week.

The WoW inflation dropped under the lead of chicken, which reduced 7.12%, followed by onions, decreasing 5.07%.

Rates of other essential commodities decreased up to 2.07% including gur, wheat flour, mash pulse, sugar, gram pulse, rice (Basmati broken), and LPG.

The inflation reading, particularly the monthly Consumer Price Index (CPI), plays a key role in guiding the State Bank of Pakistan (SBP) in setting its benchmark policy rate.

A massive drop in CPI to 6.9% in September, compared to a multi-decade high of 38% in May 2023, has raised hopes the bank will make a steeper cut of about 200 basis points in the monetary policy meeting.