Inflation remains above 15 per cent

Food, fuel prices and house rent not the root cause of surge

ISLAMABAD: Inflation rose above 15 per cent in November for the third consecutive month as the continuous surge in food prices prompted other market forces to increase prices of their goods and services.

The Consumer Price Index (CPI), a key indicator for measuring inflation, increased 15.5 per cent in November 2010 compared with the same period last year, according to data released by the Federal Bureau of Statistics.

In October, the aggregated increase in prices of goods and services was recorded at 15.4 per cent.

Contrary to previous trends when a surge in food and fuel prices as well as house rent was the root cause of high inflation, November statistics show a dangerous phenomenon as prices also rose in the remaining groups of the CPI basket, said a government statistician.

The prices of goods and services rose 1.52 per cent in November compared with the preceding month due to increase in prices of food, apparel and textile, household furniture, laundry and medical care.

In the food group, onion prices increased 67.4 per cent, potato prices rose 21.3 per cent and cooking oil brand prices soared 5 to 7 per cent, statistics show.

Woolen readymade garment prices increased three per cent, marriage hall rates surged 3.5 per cent and jewellery became 5.3 per cent more expensive. Haircut and beauty parlour charges also increased 3.8 per cent.

Washing soap and detergent prices rose by 1.8 per cent. Doctors also increased their fee by almost nine per cent, show the statistics.

The statistician working with the Federal Bureau of Statistics said that non-house rent component – composed of household, furniture, recreation, education, laundry and medical care – increased 1.6 per cent in just one month, which is unprecedented.

The State Bank recently increased the discount rate - a rate at which it lends money to commercial banks - by another 50 basis points to 14 per cent in order to control inflation.

Independent economists are skeptical about arresting inflation through monetary tightening. They rather suggest stabilisation of supply chain and strong administration to deal with price manipulators.

The average inflation during first five months of financial year 2011 remained at 14.5 per cent. The government hopes to restrict inflation at 15 per cent, which the central bank has termed over-ambitious.

Published in The Express Tribune, December 10^th, 2010.