CPI comes down to 11 percent, paves way for rate cut

[LahoreEstate]

KARACHI: The inflation continued to recede as Consumer Price Index (CPI) depicted 11.17 percent growth in the first month of the current fiscal year, Federal Bureau of Statistics reported on Monday.

The growth in CPI is substantially down when compared with the corresponding month of last fiscal when it reached three-decade high of 25 percent.

CPI increased 1.54 percent in month of July over preceding month of June in financial year 2009-10.

Analysts, calling the inflation number in the comfortable zone pointed out that the cut in the growth was mainly triggered by the higher base effect because during the initial months of last fiscal, the inflation peaked to its record levels and now with the downward trend in it, higher base effect started impacting the overall inflation numbers.

"The inflation numbers of month of July are comfortable and the decreasing inflation would pave the way for the central bank to ease off its monetary stance," Mohammad Imran Khan, analyst at First Capital Equities Limited believed.

State Bank of Pakistan (SBP) had delayed the announcement of monetary policy in the end of July and now would announce on August 15, 2009 just to have the inflation trend in month of July in sight before going for revision of policy rate.

About the likely cut in the rate, Imran said that it would be around 100-150 basis points in the next review of discount rate and said that decrease in inflation numbers would make the job of the state bank easy to take this step. Imran said that though core-inflation numbers are yet to come, however based on the decreasing trends in core inflation in the previous few months, the further cut in it could not be ruled out.

About future outlook, he opined that declining trend in the inflation would continue in the coming months with the exception of Ramzan period when it would be on higher side on month-on-month basis because of food inflation.

The falling inflation numbers, he pointed out are also supported by the stable commodities prices in the international markets with the little possibility of any higher increase in near future.

Food inflation was up by 10.67 during the month of July current fiscal, house rent index up 18.25 percent, fuel & lighting index up 13.52 percent, education expenses up 17.80 percent etc. Wholesale Price Index (WPI) and Sensitive Price Index (SPI) increased 0.74 and 9.50 percent respectively during month of July in 2009-10.


http://www.dailytimes.com.pk/default.asp...2009_pg5_1