Inflationary pressures ease as CPI increases by 19 percent

[LahoreEstate]

By Tanveer Ahmed

KARACHI: Inflationary pressure eased during March as the growth in Consumer Price Index (CPI) slid fractionally on year-on-year basis.

During March 2008-09, CPI rose by 19.07 over the same month of previous year. The growth in February over the February of previous year was recorded at 21.07 percent.

However, it was up by 1.37 percent in March over the preceding month of February of current year mainly due to increasing trend in food prices particularly onion, Federal Board of Statistics (FBS) reported on Friday.

“The inflation trend is encouraging as it has started receding following increase in the start of this current fiscal,” analysts believed.

The decreasing trend in inflation has been caused by base-effect as the inflation in the same months of previous year was heading towards new heights, Khuraam Schehzad, Senior Research Analyst at InvestCap pointed out adding that it ultimately helped when the inflation began going down in recent months.

Also, the reduction in food prices, though not significant has brought the inflationary pressures down, he added.

During July-March 2008-09, CPI inflation grew 22.97 percent over the corresponding period of previous year.

In CPI basket, fuel and lighting index took lead by increasing 26.73 percent during first nine months of current fiscal followed by food index - having more than 40 percent weightage in the basket – rising by 19.73 percent during the period under review. House rent increased by 18.69 percent during this period and transport and communication index was up by 17.84 percent during the said period. The cost of education and medicare also increased by 18.40 percent and 14.17 percent, respectively.

Khurram pointed out that most significant in the easing inflationary pressure is the reduction in core inflation (non-food & non-energy). It registered 40 basis points reduction in March by coming to 18.5 percent against 18.9 percent in the preceding month of February.

“The reduction in core inflation was recorded after four months since October and remained on the higher side in the following months,” Khurram pointed out.

In view of falling core inflation, he said State Bank of Pakistan (SBP) might review its policy discount rate downward in its new monetary policy in the current month as tight monetary stance was adopted on the pretext on high core inflation.

“As core inflation is down and finance advisor and SBP chief also reiterated the possible cut at different forums, the policy rate cut looks certain,” Khurram felt.

Wholesale Price Index (WPI) and Sensitive Price Index (SPI) rose by 11.08 and 20.10 percent, respectively in March this year over the same month of previous year.

http://www.dailytimes.com.pk/default.asp...2009_pg5_6