ISLAMABAD: The Ministry of Finance has anticipated that inflation will experience a gradual decline from this month mainly due to an improved supply situation, alleviation of imported inflationary pressures and the influence of a high-base effect.

Inflation is expected to remain at 27.5-28.5 per cent in December 2023 and to fall further to 24-25pc in January 2024, according to the Monthly Economic Update and Outlook for December, released by the ministry on Wednesday.

It said the inflation outlook for the remaining months of the current fiscal year (FY24) is seen at a moderate level despite the upward revision of administered prices (gas rates). This is on account of a stable exchange rate, contained aggregate demand, better supply position, moderation in international commodity prices, and favorable base effect.

Furthermore, the recent drop in petrol and diesel prices is likely to compensate for the inflationary pressure exerted by increased petrol prices, as the drop in fuel prices has a substantial impact on the average person through lower transportation and manufacturing expenses.

The sub-national governments’ efforts to impose lower public transport and freight tariffs in accordance with lower fuel costs will alleviate inflationary pressures even more.

The Food and Agriculture Organisation’s price index, which tracks the most widely traded food commodities, averaged 120.4 points in November 2023, unchanged from its revised October level, as price increases in vegetable oils, dairy products and sugar offset price decreases in cereals and meat. The index was 14.4 points (10.7pc) lower than a year earlier.

Published in Dawn, December 28th, 2023

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