December inflation eases to 8pc

Inflation eased to eight per cent in December, from 8.3pc last month, on the back of a slight decrease in the prices of perishable food items and the transport index, the latest data released by the Pakistan Bureau of Statistics (PBS) showed.

Higher food prices continued to increase upward pressure on inflation as prices of non-perishable items jumped 16.3pc year-on-year during the month under review.

In addition to the food sector, consumers witnessed a 9.9pc increase in restaurant and hotel prices, 9.6pc in clothing and 8.1pc in health.

On the other hand, the prices of perishable food items declined by 0.6pc, whereas those of the transport sector fell 3.5pc, helping bring down overall inflation.

During the month under review, data showed that the Consumer Price Index (CPI) inflation rate in urban areas rose 7pc year-on-year while the rate jumped 9.5pc in rural areas.

On a month-on-month basis, inflation during the month declined by 0.7pc — the first decline in eight months. This was likely on account of seasonal declines in the price of perishable items.

On a cumulative basis, average inflation during the July-December period was 8.63pc compared to 11.11pc during the same period last year. During the six-month period, inflation in urban areas averaged at 7.31pc compared to 10.63pc in rural areas.

The country’s central bank has ignored high inflation figures and kept interest rates in the negative territory in order to support growth and boost economic momentum.

With relatively unchanged core inflation at 5.6pc (month-on-month) in December, the State Bank of Pakistan will likely continue with the accommodative monetary policy stance.

Analysts say an economic recovery will likely take precedence over inflationary pressures, particularly in light of the second Covid-19 wave; the central bank may have room to push the eventual monetary tightening as far back as May 2021 or even July 2021.