KARACHI: Consumer Price Index (CPI) inflation stood at 4.1 per cent in July 2016 year-on-year (YoY), which is a 19-month high and higher than market expectations.
Previous month in June 2016, CPI inflation was 3.2 per cent YoY. On month-on-month (MoM) basis, CPI inflation increased by 1.3 per cent in July 2016 as against increase of 0.6 per cent previous month.
The analysts attribute this to increase in food inflation that contributes around 35 per cent to CPI index.
Core inflation for the month of July 2016 remained flat at around 4.5 per cent YoY and was up 0.6 per cent MoM compared to 0.1 per cent MoM previous month in June 2016.
In 2016-17, inflation is expected to clock in the range 4.5 per cent -5.0 per cent, which is below government target of 6 per cent. State Bank of Pakistan (SBP), in its latest monetary policy review, expects inflation to remain in the range of 4.5 per cent-5.5 per cent during the current fiscal year.
Pickup in food inflation and international oil prices remain key risks that can adversely affect inflation outlook.
Going forward, inflation might rise in the coming months on the back of expected revision in gas tariffs and an anticipated depreciation of Pak Rupee against US dollar.
SBP in its recently announced monetary policy statement has decided to keep interest rates unchanged at existing levels for next two months. SBP expects the average inflation to remain in between 4.5 to 5.5 per cent for 2016-17. However, SBP also mentioned some major risks to this projection which include, uncertainty in international oil prices, sluggish commodity prices, upward revision in gas tariffs and fiscal slippages.