Increase In Core Inflation
Increase In Core Inflation: Core inflation has Surged Upto 7% in april 2018: For the first time in almost 3 ½ years, core inflation increased to 7% in April 2018, which is higher than the State bank’s monetary policy rate and an indicator of high inflation era ahead.
Monthly inflation bulletin released by the Pakistan Bureau of Statistics showed that non-food and non-energy inflation, commonly known as core inflation, saw a 1.2% jump in a single month and was recorded at 7%. This is the highest level in three years and five months. Last time, in November 2014, core inflation was recorded at 6.9%.
As per economic survey 2017-18, Core inflation is measured through the indices of 43 non-food and non-energy items. Items such as kerosene oil, petrol, diesel, CNG, electricity and natural gas and food group are excluded from core inflation. The State Bank of Pakistan (SBP) uses core inflation while formulating its monetary policy and it is a good predictor of future CPI inflation.
Due to a continuous increase in education and health costs, core inflation remained higher on average and some of these measures, like increase in petroleum levy by another 200%, are also expected to strengthen inflation from the start of the next fiscal year.
The rise in core inflation and subsequent increase in headline inflation would end the low inflation, which allowed the government to increase the prices of petroleum products.
The SBP on the advice of the Finance Ministry has also devalued the rupee against the US dollar by more than 9% in the past four months, which has also contributed in the buildup of overall inflationary pressure.
In addition, the Federal Board of Revenue has imposed regulatory duties on hundreds of imported items.
In April this year, kerosene prices were 30.7% higher than a year ago. The cost of education increased almost 13%. Wage rates in the construction sector also increased by almost 10.6%, motor fuel became expensive by over 10% in April over a year ago. The cost of healthcare also surged almost 10%.
In the food group, the prices of rice increased over 11% in April over a year ago. Meat also became expensive by almost 10%, dry fruits 6.5%, milk products 5.6% and ready-made foods almost 5.5%.
The average inflation rate during the first ten months of the fiscal year, (July-April), remained at 3.77% -which was lower than the level observed during the same period of the last fiscal year. But only in april it surged ypto 7 % due to the reasons mentioned above.
SBP reserves up $593m
Foreign exchange reserves held by the State Bank of Pakistan increased by $593 million during the week ended April 27th.
The SBP reserves, which had been declining since beginning of this financial year, finally rose to $11.51 billion due to official inflows. Total reserves of the country grew to $17.71bn while the holdings of the commercial banks stood at $6.202bn.
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