ISLAMABAD: In a significant development poised to potentially cause interest rate cuts, Pakistan experienced the slowest rise in prices in February since June 2022, according to the latest data.
The Consumer Price Index (CPI) saw a decrease for the second consecutive month on a year-on-year basis, with prices rising by 23.1 percent in February compared to January’s figures of 28.3 percent. This marks a notable decline from the CPI’s peak of 38 percent recorded in May last year, which had decreased to 21.3 percent by June 2022.
However, there was no change on a month-on-month basis, as reported by the Pakistan Bureau of Statistics (PBS).
Urban inflation saw a year-on-year increase in CPI by 24.9 percent, with a slight 0.2 percent uptick on a month-on-month basis. Similarly, rural inflation measured through CPI stood at 20.5 percent year-on-year, compared to 25.7 percent in the corresponding month last year.
Food Prices in Pakistan
The moderation in CPI can be attributed to a declining trend in food prices, with food inflation on a year-on-year basis in urban and rural areas recorded at 20.2 percent and 19 percent, respectively, compared to higher figures of 27.4 percent and 25.1 percent previously. Month-on-month, food prices dropped by 0.3 percent in urban areas and 1.5 percent in rural areas.
Moreover, non-food items also witnessed a similar trend, with CPI in this category recording a 28.2 percent rise for urban consumers and 22.1 percent for rural consumers on a yearly basis, compared to 32.3 percent and 26.3 percent previously.
Currently, Pakistan’s interest rates are at a record high of 22 percent, posing challenges for the economy. However, the potential for rate cuts exists if inflation continues to decline persistently. Any further hikes in energy tariffs or fuel prices could alter this trajectory and delay potential decisions by the State Bank of Pakistan, crucial for economic revival and job creation.
