ISLAMABAD, Jan 12: Inflation decelerates from a three decade high in December 2008 after the State Bank of Pakistan raised its benchmark interest rates coupled with slight easing in food prices, suggested data of Statistics Division issued on Monday.

The inflation measured through Consumer Price Index (CPI) eased to 23.34 per cent in December from 24.68 per cent in November. The downward trend in inflation has started since October 2008, when it touched all time high of 25 per cent.

The 0.5 per cent dip in inflation during the period under review accrued partly due to one percentage point decrease in core inflation (non-food and non-energy) after four times increase in the benchmark interest rates during the year 2008.

The statistics showed that core inflation declined to 18.8 per cent in December from 18.9 per cent in November. Though the core inflation was still on the higher side in Dec 2008 as compared to 7.2 per cent of the same month last year but a downward trend has been witnessed, which is a healthy sign.

The core inflation is also rising on account of surging house rents and sub-indices related to medical care. The house index rent rose by 17.56 per cent and medical care cost by 12.67 per cent.

The SBP on Nov 12 raised the central bank’s key rate by two percentage points to 15 per cent as one of the conditions agreed under the IMF $7.6 billion bail-out package. The bank pledged to the IMF to increase the rate again if foreign reserves fell below $1.165 billion at the end of December.

However, the SBP has already reported that the forex reserves edged up to over $10 billion by June 3, 2008, leaving very meagre chances for any further increase in the interest rates by the central bank.

Consumer prices increased an average 24.43 per cent in the July-Dec period as against 8.01 per cent a year earlier. The government has already projected annual inflation rate to 22 per cent from 12 per cent announced in the budget last.

The government would be facing tough task to reduce inflation to 13 per cent in 2009-10 and 9.5 per cent under its so-called home-grown stabilisation programme.

The food inflation dipped to 27.92 per cent in December from 30.44 per cent in November. This is the biggest drop in the food inflation recorded so far after reaching to all time of 35 per cent in October. However, it is feared that the substantial increase in sugar and wheat prices might reverse the downward trend.

Prices of non-perishable food items witnessed decrease of 0.64 per cent and perishable items 7.63 per cent in Dec 2008 over the previous month of Nov 2008.

The non-food inflation remained stagnant around 21 per cent in December over the same month last year owing to no reduction in oil prices during the last three fortnight quarters in a bid to raise revenue to over come the balance of payment crisis.

Despite substantial decline in oil prices, the transport fares soared by 25.71 per cent in December over the same month last year. However, it declined by 2.05 per cent in comparison to the month of November 2008.

The cost of text books, tuition fees etc also increased by 17.01 per cent in the month under review over the last year.

The statistics showed that the inflation measured through sensitive price index -- a weekly indicator -- was up by 25.76 per cent compared to 11.77 per cent.

The inflation in the wholesale manufactured products also witnessed increase by 17.57 per cent compared to 12.14 per cent over the same month last year.