Food prices seem to be playing see-saw with consumers, and so is the CPI inflation.
Last month, after two straight galloping month-on-month increases, the food price index was down 1.12 percent. Consequently, the month-on-month CPI inflation was pulled lower to just 0.23 percent against an average of 1.17 percent in the preceding ten months.
Contrary to earlier fears, it now appears that the full-year average inflation might just be lower than the revised SBP projection of 14 -14.5 percent.
Average CPI for the 11 months of FY11 stands at 14 percent, and month-on-month inflation in June will have to cross 1.3 percent to push the full-year average number beyond 14 percent. This seems to have relatively little chance at the moment, given the fall in SPI in the last two weeks.
SPI inflation, which provides a clue of where food prices are heading;, eased by 0.4 percent between the weeks ending May 12 and May 26. This, coupled with the relative stability in fuel prices, is likely to keep month-on-month CPI below 1 percent in June.
Yet for the central bank, the persistence of inflation is a source of concern. Highlighting its worries, the SBP said in its last released monetary policy statement, "The 12-month moving average of 20-percent trimmed measure of core inflation has continued to move between 11.5 and 12.5 percent in the last one year."
Another un-easing factor is the gradual rise in house rent index. With each passing month, the house rent index is steeping up the slope. Typically, it takes about 24 months before HRI trebles from its cyclical low, which means the next 20-22 months should give some restless nights to inflation managers.