The headline inflation for October stood at 4.21 percent - highest since December 2014. On a monthly basis, CPI also inched up by 0.81 percent. The July-October average CPI came in at 3.95, signaling that the CPI is slowly but surely moving north, albeit, still manageable.
Core inflation is also picking up and the non-food non-energy component was registered at 5.2 percent, highest in 18 months since April 2015. The uptick in core inflation implies a gradual rise in demand driven inflation. It appears that the monetary easing cycle has started showing its effects, as the SBP stated that the easing impact on demand lags by 11-12 months.
On the other hand, pressures from the supply side have not yet been translated in the CPI numbers, primarily because the government has so far shown restraint in passing on the rise of oil prices to the end consumers. The chances of it happening anytime soon are remote, given the political environment surrounding the government.
The CPI food basket registered an increase of 3.58 percent in October on a yearly basis, and 0.33 percent sequentially. The transport sub-index remained virtually unchanged on a month-on-month basis, whereas, the drop on year-on-year basis has come down to 3 percent, as the furl pieces have been kept unchanged for quite some time.
The quarterly revision in house rent index also contributed to the overall inflation. The month-on-month change was recorded at 2 percent - higher than the average 1.1-1.3 percent usual upward revision in house rent. The year-on-year increase in the second largest CPI component was recorded at a high-ish 6.65 percent - though this number is still doubted by critics.
It could be safely said that inflation is by and large in control but there are reasons for it to rebound. The average wholesale price index for July-October hovers north of 3 percent - a sizeable increase from an average of 0.2 percent in the preceding four month period. The impact on retail prices could yet be felt in the months to come.
Government borrowing may have slowed down but the toll is still heavy. The monetary assets also show inflationary pattern, with a mammoth 20 percent M2 growth over the last year. All said, things look well in control for the government to keep inflation well within its target of 6 percent for FY17.
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