According to the latest data released by the Pakistan Bureau of Statistics (PBS), prices in the country continue to increase at a steady pace. Consumer Price Index (CPI), which tracks the prices of around 480 commodities every month in urban centres across the country and is the most important indicator of price movements, inflation remained at 3.8 percent in October, 2017, compared to the same month a year earlier due mainly to an increase in the prices of perishable food items. On a monthly basis, CPI rose by 0.75 percent in October, 2017 compared to 0.6 percent in the previous month and 0.8 percent in October, 2016. The cost of food and non-alcoholic beverages increased by 3.24 percent in October, 2017 over the same month a year before while prices of non-perishable food items soared by 0.78 percent, perishable food items by 16.39 percent, clothing and footwear by 3.79 percent, housing, water, electricity, gas and other fuels by 4.88 percent, furnishing and household equipment maintenance’s by 3.06 percent, health by 10.57 percent, transport by 3.9 percent, communication by 1.4 percent, education by 11.46 percent and restaurant and hotels by 6.57 percent. Average inflation in July-October, 2017 stood at 3.5 percent as against 3.95 percent in the same period of last year. Core inflation, measured by excluding the volatile food and energy prices, was registered at 5.3 percent in October, 2017, up 0.9 percent from the preceding month.

Although price pressures in the economy are still subdued and the inflation target of 6.0 percent for the current year appears to be achievable, the gradual uptick in inflation is little worrying. This is so because even if the prices continue to increase at a slower pace, this would have a negative impact on the lives of ordinary people and the poor who spend a large part of their incomes on food items and are just surviving. The real value of savings will also erode to the extent of inflation. The government could also be the loser as continued inflation in the economy could constrain the monetary authorities to raise the policy rate, putting more pressure on the budget. It needs to be mentioned that the present level of inflation is not likely to soften anytime soon. The government has raised the domestic prices of oil products w.e.f. 1st November, 2017 and this is going to have a negative impact on the overall price situation. Consensus is also developing to limit oil output levels in the international market which could further force the government to increase the domestic oil prices in the coming months. The government has also recently increased regulatory duty on a large number of imports and this would also put more pressure on the rate of inflation. All of this means that although the price situation is still under control, the government needs to monitor the behaviour of inflation closely and try to take appropriate measures if inflationary pressures in the economy begin to re-emerge. A sustained stability in prices is always linked to improved fiscal position, contained budgetary borrowings, improvements in relation to availabilities in the economy, right adjustment in monetary policy stance and a reduction in current account deficit to sustainable levels to ward off the possibility of a major depreciation of the rupee. The incumbent government often takes the credit of reducing the inflation rate but this success could only be guaranteed if timely measures are taken to improve the factors affecting the rate of inflation.