- CPI inflation in rural areas increased by 26.9% on year-on-year basis
Consumer Price Index (CPI)-based inflation hit 24.9% on a year-on-year (YoY) basis in July 2022, compared to an increase of 21.3% in the previous month and 8.4% in July 2021, revealed data released on Monday, as rising commodity prices and a weaker rupee took a toll on the economy that is under strain due to falling foreign exchange reserves.
Meanwhile, on a month-on-month basis, CPI-based inflation increased by 4.3% in July 2022 as compared to an increase of 6.3% in the previous month, and an increase of 1.3% in July 2021, stated the Pakistan Bureau of Statistics (PBS).
CPI inflation in urban areas increased by 23.6% on year-on-year basis in July 2022 as compared to an increase of 19.8% in the previous month and 8.7% in July 2021. On month-on-month basis, it increased by 4.5% in July 2022 as compared to an increase of 6.2% in the previous month and an increase of 1.3% in July 2021.
CPI inflation in rural areas increased by 26.9% on year-on-year basis in July 2022 compared to an increase of 23.6% in the previous month and 8.0% in July 2021. On a month-on-month basis, it increased by 4.2% in July 2022 as compared to an increase of 6.6% in the previous month and an increase of 1.4% in July 2021.
A 14-year high
"The yearly inflation is a 14-year high," said JS Global in a comment. "The month's CPI came higher than our estimates of 22%. In addition to quarterly housing uptick, key reasons for a higher inflation reading this month are higher petroleum product prices over previous months and higher food inflation," it added.
Rising inflation has emerged as a key concern for Pakistan's economy, already in the midst of an exchange-rate crisis and fears over its balance-of-payments position. Economic experts have earlier warned that the country will see food and energy prices rise further with the headline inflation likely to cross 24% in July.
Earlier in July, the State Bank of Pakistan (SBP), amid expectation of further tightening due to a higher inflation outlook, increased the key interest rate by 125 basis points, taking it to 15%. The latest inflation figure raises chances of an aggressive monetary tightening by the central bank, experts say. The SBP is due to hold its next Monetary Policy Committee meeting on August 22.
The central bank has already projected inflation to remain elevated during the current fiscal year due to the significant supply shock.
“Despite the dampening effect of fiscal and monetary tightening on demand-pull inflation, inflation is likely to remain elevated around current levels for much of FY23 due to the large supply shock associated with the necessary reversal of fuel and electricity subsidies,” said the central bank after its last MPC meeting. “As a result, inflation during FY23 is forecast at around 18-20% before declining sharply during FY24.”
On the other hand, the government, in a late-night development on Sunday, announced slashing the petrol price by Rs3.05 per litre, and increasing the price of High-Speed Diesel by Rs8.95 per litre. However, the development is unlikely to have a big impact on the inflationary reading.