Inflation easing on lower food and oil prices

KARACHI – Pakistan’s annual consumer price inflation was likely at 14.10 percent in February, as food prices remained low and the government was absorbing most of the impact of higher world oil prices, a Reuters poll shows. A higher base effect from last year also likely helped a marginally slower rise in the consumer price index (CPI) in February, after it rose 14.19 percent in January from a year earlier.
“It seems that the government’s and the central bank’s patience with the inflation rate is finally beginning to pay off, as the high-base from last year starts to take effect this quarter,” said Khalid Iqbal Siddiqui, director at Invest and Finance Securities. Analysts said that the weekly sensitive price indicator (SPI) had also started easing, thanks mainly to food prices retreating in 2011. About two-third of the impact of a higher international petroleum price had yet to be passed on to consumers, which had helped control inflation, they said.
“If the full impact of fuel prices had been passed on this month, the February CPI would have been estimated at 14.80 percent year-on-year,” said Siddiqui, who forecast February CPI at 13.60 percent. Analysts said steady inflation meant the central bank was likely to keep its policy rate unchanged again when it announces the next monetary policy by the end of the month. In January, the State Bank of Pakistan left its policy rate unchanged at 14 percent, noting the delicate balance between growth and rising inflation.