MARKET ANALYSIS

HIKE IN ENERGY TARIFF TRIGGERS FOOD INFLATION

The new wave of inflation hit the markets, raising the prices of different commodities, as the price of whole-wheat flour was hiked to Rs100 per kg, pasteurised milk Rs205 per litre, large bread Rs150 and yogurt Rs165 per kg following the energy tariff escalation and other factors.

The owners of (Chakki) grinding mills in the provincial metropolis jacked up the prices of whole-wheat flour by Rs2/kg to Rs100 per kg. They said the spiraling wheat price in the open market was the main factor leading to the hike in whole-wheat flour price. The price of wheat has crossed Rs3,000 per 40 kg mark, forcing us to increase the price of flour, Abdul Rahman, Secretary General of ACOA told. It may be noted that the inflation has been projected to speed up to over a decade high in June according to a group of analysts. The analysts suggested the inflation, as measured by the consumer price index (CPI), will rise in the range of 18.1-19.5 percent in June on an annual basis, from 13.8 percent in May. That would be the highest reading since 2009, they added. They said the CPI in June will rise to almost 20 percent based on recent changes in the prices of fuel and other commodities and “the current situation has been compared with the 2008 situation following the global financial crisis.” The rising inflation has emerged as a key concern for the country’s economy, which is battling falling foreign exchange reserves amid a widening import bill. Last month, the State Bank of Pakistan (SBP), in its bid to tackle economic headwinds, raised the key interest by 150 basis points to 13.75 percent. On the other hand, the incumbent government partially removed energy subsidies by increasing the petroleum products prices initially by Rs30 per litre and later raising the prices to Rs230 per liter from Rs150, a move hugely contributed to the soaring inflation.