Inflation cools to 8-month low in February

• Consumer prices rise 23.06% YoY in February.
• Decline in inflation mainly due to drop in food prices.
• This is lowest inflation reading since June 2022: AHL.

KARACHI: The consumer price inflation eased for a second straight month in February to its lowest level since June 2022, official data showed on Friday, as food and energy prices moderated amid a slowing economy.

Consumer prices rose 23.06% year-on-year in February, down from 28.34% in January, according to the Pakistan Bureau of Statistics (PBS) data.

The decline in inflation was mainly driven by a drop in food prices, which account for more than a third of the consumer basket. Food inflation slowed to 18.15% in February from 24.96% in January, as the supply of perishable items improved and commodity prices softened.

Transport and housing costs also increased at a slower pace in February, while education and health expenses rose slightly faster. 

“This is the lowest inflation reading since June 2022,” brokerage Arif Habib Limited (AHL) said in a note.

On a month-on-month basis, consumer prices edged up 0.25% in February, compared with 1.85% in January. The easing inflation provides some relief to the central bank, which has kept its policy rate unchanged at 22% for the fifth straight meeting in January to curb soaring inflation and a widening current account deficit. The next monetary policy announcement is due on March 18.

The central bank expects inflation to trend lower in the coming months, as the rupee strengthens in 2024 and the impact of utility price hikes fades. It projects average inflation for the fiscal year ending in June 2024 to be in the range of 24% to 25%.

The government has raised energy prices and taxes to meet the conditions under the International Monetary Fund (IMF) programme that ends in April. Cooling inflation further and negotiating a fresh IMF loan will be a key priority for the new government. The new administration will seek a loan of at least $6 billion to avert an economic crisis and repay billions of dollars in debt due this year.

The official data showed food costs rose 18.15% from the same period a year ago compared with 24.96% last month. Transport prices climbed 15%, while housing costs increased by 36.08%. 

The July-February average inflation remained at 27.96% compared to 26.19% in the same period of the previous year. The PBS said urban inflation increased to 24.9% on a year-on-year basis in February 2024 as compared to an increase of 30.2% in the previous month and 28.8% in February 2023. 

On a month-on-month basis, it increased to 0.2% in February 2024 as compared to an increase of 1.8% in the previous month and an increase of 4.5% in February 2023. 

The rural inflation stood at 20.5% on a year-on-year basis in February 2024 as compared to an increase of 25.7% in the previous month and 35.6% in February 2023. On a month-on-month basis, it decreased to 0.3% in February 2024 as compared to an increase of 1.9% in the previous month and an increase of 4% in February 2023.

Originally published in The News