THIS refers to the rejoinder by Mr Syed Wasimuddin (SBP’s chief spokesman) that appeared in the EBR weekly on November 14. He cites two well-known core inflation estimation bases viz. the exclusion and trimming methods, indicating a preference for the latter. Although he is unclear about which method SBP employs, you get the impression that on October 20, it used the trimming method while revising its core inflation estimate by excluding from its basket items that exhibit “extreme price changes”. What he leaves unclear though is how “extreme price change” differs from price “volatility”.

His argument that SBP excluded CNG, fossil fuel and electricity prices from its basket for calculating core inflation because they are determined by “mainly by supply side” makes little sense because irrespective of the method of their determination, the prices of these items substantially inflate consumption expenses, especially of the low-paid.

His argument (impliedly contradicting market perception about rising negative real interest rates) that SBP uses CPI and not core inflation as the determinant of interest rate contradicts his stand. CPI is higher than core inflation index and therefore the difference between CPI and market interest rates (i.e. real interest rate) will be turn out to be an even higher negative figure.

I stand by my comments about economists who rely on semantics rather than ground realities to gain credence for their view. The man in the street is concerned more about how inflation ultimately impacts his standard of living rather than grasping the fine distinctions between headline, SPI, CPI or core indicator of inflation.

Finally, compared to self-praise the more credible indicator of an institution’s independence and integrity is its market perception. That, unfortunately, isn’t entirely in agreement with Mr. Wasimuddin’s perception.

A.B. SHAHID,
Karachi