For the first half year, inflation reached 10.87 per cent, slightly over the government annual target of 9.5 per cent. The falling trend in inflation rates shows that government will be able to achieve its target. - File photo

ISLAMABAD: Pakistan inflation tumbled to a 13-month low in December 2011, statistics showed on Monday with officials saying that the State Bank of Pakistan may cut its benchmark rate in the next monetary policy.

The inflation, measured through the Consumer Price Index (CPI), fell to 9.75 per cent in December from 10.2 per cent in November 2011, as the energy crisis damped economic growth, suggested data of the Pakistan Bureau of Statistics (PBS).

It was the lowest inflation rate since November 2010. Though the pace of inflation enter a single digit, but still it shows price spiral mainly driven by increase in price of fuels, lubricants etc., during the month under review.

Experts say the deceleration in the inflation rate is modest in the past couple of months which could spur the central bank to lower interest rates further. The central bank kept the interest rate unchanged at 12 per cent on November 30, 2011.

The core inflation, excluding food and energy, eased to 10.1 per cent in December from 10.4 per cent in November. This slight fall may provide a cushion to the central bank to further lower interest rate to spur economic growth.

Emerging economies like Indonesia, Thailand have also realised to lower interest rate to stimulate economic growth.

For the first half year, inflation reached 10.87 per cent, slightly over the government annual target of 9.5 per cent. The falling trend in inflation rates shows that government will be able to achieve its target.

At the same time, a weaker rupee will fan inflation, which is already over 10 per cent. The State Bank seems reluctant to intervene in the market to check the fall of the rupee. It is expected that the rupee to depreciate against dollar as low as Rs90 by end of this month.

But contrary to this, food inflation recorded a single digit growth of 9.53 per cent in December, from a year ago. As a result, prices of non-perishable food items witnessed a surge of 10.82 per cent and that of perishable items 2.68 per cent.

But to produce feel-good figures, the government this year reduces the food weight in CPI basket from 40.34 per cent to 34.46 per cent. This reduction will help in lowering overall inflation as well.

During the month under review the prices of egg up by 6.84pc, wheat (2.89pc), fish (2.62pc), sweetmeat (1.83pc), milk powder (1.48pc), betel leaves and nuts (1.14pc) and dried fruits (0.88pc).

In the non-food basket, price of kerosene up 5.04pc, firewood whole (4.28pc), household servant (3.90pc), doctor (MBBS) clinic fee (2.42pc), woollen readymade garments (2.39pc), medical equipment (1.95pc), marriage hall charges (1.73pc) and household textile (1.68pc).