ISLAMABAD, Jan 11: Inflation rose to 7.37 per cent on year in December - its slowest increase so far in the current fiscal year - due to a slight drop in food prices and a higher statistical base last year, official data showed Tuesday.
December's increase was also below market expectations of a rise of 8pc-to-8.50pc, analysts said. The consumer price index rose 9.26pc in November. On month, the overall CPI fell 0.85 per cent compared with gains of 1.12pc in November.
In December, the heavily weighted food and beverages component of the CPI basket rose 7.88pc on year, slower than 13.56pc in November. Food and beverages account for more than 40pc of the total weight of the CPI index.
House rent - another important component of CPI - climbed 11.67pc, up from 11.21pc in November. In the first half of the fiscal year that began July 1, consumer prices rose an average 8.81pc from 9.1pc in the first five months of the current fiscal.
The government now expects inflation for the full fiscal year to come in at 7pc, up from a budgeted forecast of 5pc. Pakistan's central bank has been tightening monetary policy since July to curb rising inflation, which it said was mainly due to an increase in food prices - especially wheat.
However, Ishrat Husain, the governor of the State Bank of Pakistan, told Dow Jones Newswires in Singapore on Tuesday that he would be wary of hasty interest-rate hikes for fear of hampering economic growth.
"We are committed to (fighting) inflation but at the same time, we don't want to have a situation where economic recovery and economic growth momentum are stifled because of the impatient moves of the central bank," Husain said.
Analysts said the fall in food prices is higher than expected. "The decline is mainly driven by the food component. However, core inflation is still up, and that is a cause of worry, but the headline CPI fall is larger than expected," said Sakeb Sherani, chief economist at ABN Amro Bank.
"Core inflation is linked with monetary policy, and that is a better indicator of whether monetary policy needs to tighten or not. "Pakistan has imported almost a million tons of wheat to stabilize food prices and plans to import another 500,000 tons in the next three months.
The table uses 2001 as the base year. CPI Commodity groups percentage growth on year December 2004 November 2004: Food and Beverages +7.88 +13.56 Fuel and Lighting +3.00 +1.91 House Rent +11.67 +11.21 Apparel, Textile & Footwear +2.54 +2.57 Transport & Communication +6.73 +4.11 Medicare +0.95 +1.02 Household, furniture and equipment +6.87 +6.25.