Faizan Saleem
The inflation figure of Pakistan economy remained tamed in previous two months due to change in methodology of index calculation but now the Consumer Price Index (CPI) could go upward in the month of November as the impact of base-effect would get offset.
The moderate figure of Inflation has also provided a space to the State Bank of Pakistan (SBP) to aggressively cut the discount rate to spur the much needed growth in an economy. However, in next monetary policy due on November 30, the central bank would have some pressure to curb its monetary easing stance which also criticized by the IMF in recent talks held in Dubai.
During the month, the higher food prices have been passed on to the end consumers by persistently reducing the subsidy, hence, the coming monthly inflation figure is likely to pick up the pace.
The government has also announced to raise the wheat support price by Rs 100 to Rs 1,050 per bag recently. The hike in prices of electricity and gas is also on the cards of the government which could further make the situation worsen.
Furthermore, the possibility of a likely price increase in varied petroleum products to end consumers is also underway. As international oil prices remained rigid at higher level nowadays. The possibility of second round effects of high level of oil prices feeding into the core price cannot be ruled out.
The currency of Pakistan also deteriorates in previous two months mainly due to halt in influx of Foreign Direct Investment (FDI) and financial inflows. The foreign reserves held by the central bank are also expected to drop in coming months which could further push the Pakistan rupee downwards. Hence, the price pass through of a weaker exchange rate may finally take full sweep in coming months ahead.
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