Annual inflation accelerates to 4.1pc in July on back of rising food, fuel costs

Data from the Pakistan Bureau of Statistics (PBS) on Friday showed that consumer inflation accelerated to 4.1 per cent year-on-year in July, up from 3.2pc in June, driven by rising prices for food items, fuels and medicines.

July’s consumer price inflation month-on-month was 2.9pc, the bureau said.

The finance ministry on Monday had projected consumer inflation for July to remain in a range of 3.5-4.5pc, citing stable prices and improved supply conditions, as price pressures ease further after the previous fiscal year’s sharp decline.

The higher inflation reading follows the State Bank of Pakistan’s assessment of a deteriorating inflation outlook, leading it to leave the key interest rate unchanged at 11pc.

The bank’s monetary policy committee said on Wednesday that energy prices, particularly for gas, had risen more than expected, and it considered the real policy rate should be adequately positive to keep inflation in the 5-7pc target range.

Short-term inflation, measured by the Sensitive Price Index, had risen by 4.07pc week-on-week ending July 24, driven primarily by a sharp uptick in the retail prices of vegetables and petroleum products.

It marked the steepest weekly increase in recent times, primarily attributed to the surge in petroleum prices and their cascading impact on domestic costs. The government has significantly increased petroleum rates over the past month, which, alongside elevated transport fares, has escalated the cost of transporting perishable goods.

Pakistan is pushing through a series of economic reforms under a $7 billion International Monetary Fund programme, including a contractionary government budget passed in June that slashed spending to curb the fiscal deficit.