Bloomberg News

Pakistan Inflation Slows to Two-Year Low, Easing Rate Pressure

January 03, 2012

Jan. 2 (Bloomberg) -- Pakistan’s inflation slowed in December to the lowest level in 25 months, giving the central bank scope to cut interest rates.

Consumer prices rose 9.75 percent from a year earlier, the Bureau of Statistics said in Islamabad today. That compares with a 10.19 percent gain in November.

Emerging markets from Indonesia to Thailand have eased monetary policy to support consumer demand as Europe’s debt crisis threatens a global economic slump. Pakistan’s central bank last month left rates unchanged, pausing to gauge the impact of a 2 percentage-point cut since the end of July as foreign investment declines.

“The easing inflation trend will give room for another rate cut,” said Raza Jafri, an economist at AKD Securities Ltd. in Karachi. “The central bank will still closely monitor inflation pressures emanating from the rupee’s weakness.”

The Pakistan rupee weakened 5 percent to 89.95 against the U.S. dollar in 2011, risking higher import costs. The Karachi Stock Exchange 100 Index declined 5.6 percent last year.

Policy makers in Pakistan plan to boost economic growth from 2.4 percent in the year ended June 30, one of the lowest expansions in the past decade, as the country struggled to cope with floods and militant attacks.

The growth rate may be 0.5 percentage point lower than the government target of 4.2 percent for the current fiscal year, a finance ministry official said Oct. 19, citing the impact of floods in the country.

Floods in August forced more than one million people from their homes and damaged crops in parts of southern Pakistan still recovering from the worst ever monsoon inundations in 2010. Terror attacks in the South Asian nation have killed at least 35,000 people since 2006, according to government estimates.

--Editors: Cherian Thomas, Ravil Shirodkar

To contact the reporter on this story: Haris Anwar in Islamabad at Hanwar2@bloomberg.net.

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net


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