Pakistan's core inflation, which strips out volatile food and energy prices, eased for a second consecutive month to 7.5% in October. Data released on Monday by the Pakistan Bureau of Statistics (PBS) showed urban core inflation at 7.8% and rural core inflation at 7.1%, down from a peak of 8.8% in August.
The slowdown matters because the State Bank of Pakistan raised its policy rate to 12% last week, warning that high food and energy prices could seep into core inflation. The gap between the policy rate and core inflation has now widened to 4.5 percentage points, which benefits commercial banks at the expense of borrowers, mainly the finance ministry.
Headline inflation also slowed to 9.6%, at 9.5% in urban areas and 9.8% in rural areas, according to the PBS. The International Monetary Fund has raised its inflation forecast for Pakistan for the current fiscal year to 9.9%, above the official target of 8.2%.
Pressure on households remains heavy. The official bulletin showed petrol 42% dearer than a year earlier in October, transport services up 27% and electricity tariffs up 23%. Onions rose 82%, wheat 39% and wheat flour 35%, while tomatoes, potatoes, sugar, eggs and pulses were 10% to 55% cheaper.