ISLAMABAD, June 6: The consumer price inflation will creep up to around eight per cent by the end of June 2007 against the target of 6.5 per cent mainly due to rising prices of food items, says Adviser to Prime Minister Dr Salman Shah.

“The inflation — measured through the consumer price index — target will be exceeded in the May-June period. It would be around 7.7 to 7.9 per cent,” Mr Shah conceded here at a pre-budget seminar organised by the press information department on Wednesday.

He said the end year inflation depended on the current two months — May and June — calculation. However, he said this year the inflation was driven by food prices, particularly the prices of perishable food items.

The adviser also hinted on relaxation of the monetary policy by start of next fiscal year on the pretext that the inflation would hopefully come down to 6.5 per cent. With this possible reduction in inflation, he said the State Bank of Pakistan would not need to further tighten the monetary policy.

“This is not our domain to talk about it. However, the SBP would definitely consider rationalising the interest rates,” he added.

He said the core inflation—non food and non energy—was around five per cent, which he said remained less than the target of six per cent during the period under review.

He said that food prices depended on two main factors —consumption and international prices. Another factor was interest of farmers, on which the government wanted to give maximum relief.

He said that it was a complex situation to be brought under control as many players were involved in the food supply chain. However, he claimed that food prices remained at around 10 per cent during the current fiscal year as against the 11 per cent in the international market.

The adviser said that food inflation would be under control in the current month as there was a record growth in wheat production followed by sugarcane and rice.