Inflation Slowdown

Consumer price inflation‌ in Pakistan decelerated⁤ to 5.6% year-over-year ‌in December,according to official data released on Thursday. This marks a continued decline from 6.1% recorded in November‍ and a important drop from peak levels⁣ exceeding 30% observed‌ throughout 2023, as detailed in official statistics from teh Pakistan Bureau of Statistics (PBS).

The monthly decline in prices was primarily driven ​by lower costs ⁢for perishable food ‌items, with food prices falling 1.7% month-on-month across both urban and rural‍ areas, the PBS reported.

Central‌ Bank Response

This easing of inflationary pressure followed a surprising move by ​the⁢ State Bank of‍ Pakistan (SBP) in the previous month. The SBP cut its key policy rate by 50 basis points to 10.5%, breaking a four-meeting pause. This decision went against expectations of analysts polled⁢ by Reuters, who had ‍predicted⁣ rates would remain unchanged.

The finance ministry ⁢had anticipated a‍ moderate inflation rate of 5.5-6.5% for December,a forecast that proved accurate.

Ongoing Concerns & Future Outlook

Despite the recent improvements, the SBP has cautioned that core inflation remains persistent.⁣ Thay also anticipate a potential temporary increase in headline ‍inflation towards the end of the current‌ fiscal​ year (ending in June) due to base effects. Non-food inflation continues to‌ be elevated⁣ in both ‌urban and rural areas, reinforcing the central ‍bank’s concerns​ about underlying price pressures.

The International monetary Fund (IMF) has also advised against premature monetary easing within the framework⁢ of the $7 billion loan program,⁤ suggesting a cautious ‍approach to further rate adjustments.

During the July-November period, inflation remained within the SBP’s target range‍ of 5-7%, but⁢ the outlook remains largely unchanged.