- The drop in inflation marks a significant drop compared to the 1.16 % of the previous week.
- The IPC, which amounted to 4.1 % in December, could fall below 3 % in January 2025.
- Analysts anticipate a potential decrease of 1.5 percentage points of the key rate.
Islamabad: Inflation in Pakistan seems to calm down quickly, the sensitive price index (SPI) displaying a modest increase of one year on the other of only 0.52 % for the week ending on January 23, feeding the expectations of a possible reduction in the lead rate by the State Bank. from Pakistan next week, The news reported on Saturday.
This is a notable decrease compared to the 1.16 % of the previous week and the fourth consecutive week of lower inflation, which is now down compared to the 5.08 % recorded in late December 2024.
The drop in SPI – a short -term inflation measure which follows essential goods – prompted economists to predict a significant drop in the Consumer Price (IPC) of January.
The IPC, which amounted to 4.1 % in December, could fall below 3 % in January 2025, to possibly reach 2.5 %. This trend could encourage Pakistan Statient Bank (SBP) to lower its key rate, currently at 13 %.
Analysts anticipate a potential decrease of 1.5 percentage points at the meeting of the Monetary Policy Committee of the Central Bank on January 27. The drop in spinnaker contrasts strongly with the inflation peak of 48.35 % recorded in May 2023, a period of serious economic tensions. The latest data, published by the Pakistani Bureau of Statistics (PBS), highlight a weekly drop in SPI 0.77 %, reflecting a mixed price of 51 essential products monitored in 17 cities.
It should be noted that the SPI in annual sliding of 0.52 % marks the lowest inflation rate since October 2014. Among the monitored items, 14 have experienced price increases, 12 have seen discounts and 25 remained Unchanged. Tomatoes and eggs led prices, falling 33 % and 10.2 % respectively. Onions and potatoes followed suit, with drops of 9.8 % and 7.4 % compared to the previous week. Likewise, the cost of liquefied oil gas (LPG) decreased by 2.7 %, that of legumes by 1.6 %and that of chicken by 1 %.
Conversely, sugar and bananas recorded modest increases of 2.93% and 2.7% respectively. Other basic products, including garlic, basmati rice, vegetable ghee and legumes, have increased slightly less than 1 %.
Despite the overall drop, several essential products have increased substantial price increases during the past year. Ladies sandals jumped 75 %, while potatoes and legumes increased 44.3 %and 38 %respectively. Likewise, the price of Moong legumes has increased by 33 %, powdered milk by 26 %, beef of 22.4 %and vegetable ghee by 17 %. Garlic prices have also increased by 16 %, gas costs for the lowest consumption tranche increased by 15.5 %, the prices of the vegetable ghee increased by 15 %over the past year .
Conversely, certain products such as onions have seen their price drop by 52 %, eggs by 39 %, tomatoes by 37 % and the price of wheat flour from 36 % compared to last year. Likewise, the prices of the chili powder decreased by 20 %, and electricity costs for the least consumer panel decreased by 18.1 %.
The recent drop in inflation could bring an essential relief to households and businesses. The drop in prices of basic necessities could alleviate some pressure on consumers, while possible reduction in the key rate could stimulate economic activity. However, economists warn that structural reforms and better management of the supply chain are essential to guarantee sustainable prices stability.