According to the most recent data, Pakistan observed price increases in February that were the smallest since June 2022. This is a significant development that may also expedite the much-needed interest rate reductions.
The consumer price index (CPI) decreased for the second consecutive month on a year-over-year basis, indicating that prices increased by 23.1% in February compared to 28.3% in January. The CPI was measured at 21.3 percent in June 2022, having peaked at 38 percent in May of the previous year.
As per the Pakistan Bureau of Statistics (PBS), there was no variation observed on a monthly basis.
With regard to urban inflation, the CPI increased by 24.9 percent on an annual basis and by 0.2 percent on a monthly basis.
However, compared to the same month previous year, when it had reached 25.7pc, the increase in rural inflation as assessed by the CPI was just 20.5pc.
The CPI slowed in February mostly because of a downward trend in food costs; year over year, food inflation in urban areas was recorded at 20.2 percent and in rural areas at 19 percent, respectively, compared to the respective figures of 27.4 percent and 25.1 percent in rural regions.
In terms of month-over-month variation, food costs decreased by 1.5 percent in rural areas and by 0.3 percent in urban areas.
In February, non-food products also showed a similar pattern; the CPI for this category showed an increase of 22.1 percent for rural consumers and 28.2 percent for urban consumers on an annual basis.
The economy of Pakistan is currently paralyzed by record-high interest rates of 22 percent, which is hindering the expansion of current businesses and the establishment of new ones. The majority of the population, who are severely affected by the cost of living crisis, desperately need more jobs and wage increases.
But rate reductions are only feasible in the event that inflation continuously lowers. However, any additional increases in fuel prices and electricity tariffs will undoubtedly alter the course and postpone any positive decisions made by the State Bank of Pakistan.
