Inflation rate slows down to seven-month low of 10.2%
Statesman Report
ISLAMABAD: For second month in a row, pace of increase in prices significantly slowed down and recorded at 10.2% in March due to correction in prices of food and energy items – the factors that in past had kept the reading high.
Based on a new methodology, the headline national Consumer Price Index (CPI) slowed down to 10.2% in March over a year ago, the Pakistan Bureau of Statistics (PBS) reported on Wednesday. It was the second month in a row that reading eased by more than 2%. In February, the inflation index had been recorded at 12.4%. The 10.2% inflation was the lowest reading in past seven months. Last time, in August the inflation had been recorded at 10.5%.
The last inflation figures also suggest that the markets functioned normally last month despite partial lockdown of the country to control spread of Coronavirus. But it will be a challenge for the provincial and district authorities to effectively monitor the prices and supplies to avoid any surge in coming months.
The pace of inflation, including food, slowed down both in urban and rural areas. The PBS calculates the inflation index by monitoring prices of 356 commodities in 35 cities and 244 goods in 27 rural markets.
The food inflation in urban areas that stood at 15.2% in the preceding month, eased to 13% in March. Similarly, in rural areas, the food inflation pace slowed down from 19.7% in February, to 15.5% last month.
In March, prices of the majority of perishable food items reduced as compared to February, which pulled the index down. There was also no increase in electricity prices on account of monthly fuel price adjustment in March, which also positively impacted the index. Instead, on year-on-year basis, the PBS has reported 13.92% reduction in electricity charges in March.
The core inflation, which is calculated by excluding food and energy items, has gone down in urban areas and remained static in rural areas. The core inflation in urban areas decreased from 8% to 7.4% and remained at 9.4% in rural areas.
The headline inflation rate of 10.2% is still lower than the twice reduced key policy rate of 11%, set by the central bank in an emergency meeting. The real interest rates, calculated from core inflation rate, are still positive by 3.6%.
The Dr Reza Baqir-led central bank has been targeting the headline inflation instead of core inflation for setting the policy rate. The critics of the central bank’s new monetary policy approach argue that the inflation in Pakistan was cost-push.