According to the data released by PBS (Pakistan Bureau of Statistics) on Friday, the interest rate is bound to increase further in the next monitory policy announcement as the core inflation reaches to the highest 8.2% in four years as of October 2018.
The 8.2% core inflation is slightly lower than the 8.5% key discount rate that the SBP (State Bank of Pakistan) announced for the period of 2 months in September. The narrow gap between core inflation and key interest rate will probably lead to another round of increase in the interest rates in the current fiscal year.
Even the headline inflation measured by CPI (Consumer Price Index) jumped 7% in the month of October – the fastest pace in the past four years, beating the expectations of below 6% inflation.
The alarming inflation readings have led to an unofficial estimate by IMF (International Monetary Fund) that Pakistan is likely to reach 14% inflation by the end of the current fiscal year in June 2019.
Core inflation excluding energy prices and volatile food has increased up to 8% in September. This is the highest in the last four years. The last time inflation stood at such a high point was in July 2014, where the stats were 8.3%.
Gas prices increased up to 104.9%, high-speed diesel prices soared up to 34.2%, heating oil price increased by 32% and bus fares increased by 45% in the previous month. Overall, prices of water, electricity, housing and gas group increased by 1/10th. The group has 29.4% weightage in overall inflation basket, making it the second largest group after food.
The continuous and further increase in interest rate will make the task of constructing 5 million homes at affordable cost a bigger challenge for PM Imran Khan.
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