ISLAMABAD, Feb 12: Inflation rose by 6.64 per cent during the month of January 2007 over the same month of the last year, Federal Bureau of Statistics (FBS) said on Monday.

This is the lowest increase in inflation so far recorded in any month of the current fiscal year because of the falling food prices, particularly of potatoes, tomatoes and onions. The average increase in inflation during the last seven months was 8.14 per cent.The statistics showed that inflation measured through consumer price index (CPI) declined by 0.88 per cent in January 2007 over the previous month of December 2006. The month-on-month comparison indicated that prices of food items witnessed negative growth in January 2007.

The slow down in inflation during the month under review was mainly due to constant decrease in price of kitchen items, which pushed down the food inflation to 8.7 per cent in January 2007 from the double digit growth in the previous month of December 2006.

Similarly, the recent downward revision of oil prices in the domestic market had also resulted into lowering the transportation cost and fares. With this the non-food inflation also witnessed steep decline during the month under review.

The FBS data showed that the inflation, however, increased by 8.14 per cent during the July-Jan period of the current fiscal over the same period of the last year. The government found it very difficult to keep inflation below six per cent - a target set in the last budget - despite the tight monetary policy of the State Bank of Pakistan and subsidies.

Analysts said that inflation during the month of February would further rise as supply of essential commodities like potatoes, onions in the market might decrease. The unprecedented increase in the liquefied petroleum gas price during the current month would also push up the over all inflation.

Prices of food and beverages fell 2.22 per cent in January compared with December, while house rents increased by 0.41 per cent. Similarly, the transportation fares also witnessed decline by 2.04 per cent in January 2007 over the previous month of December last.

Economic Advisor to Finance Ministry Dr Ashfaq Hassan Khan told Dawn that inflation in the month of January declined substantially because of constant decrease in price of the food items.

He said that the non-food inflation is also on declining trend. “I am confident that we may achieve this year inflation target of average 6.5 per cent,” he claimed.