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Karachi: Pakistan's inflation accelerated in December as local wheat prices rose to a record, pushed up by smuggling of the grain to neighbouring Afghanistan.
Consumer prices jumped 8.8 per cent from a year earlier, after gaining 8.7 per cent in November, the statistics bureau said on Monday in Islamabad. Economists expected a nine per cent rise.
Inflation may climb further as riots which erupted after the December 27 assassination of Opposition leader and former Prime Minister Benazir Bhutto threaten supplies of wheat and other food staples. That may put pressure on the central bank to increase interest rates later this month.
"January inflation may reach above 9 per cent," said Asif Ali Qureshi, head of research at Invisor Securities in Karachi. "High food prices and the impact of record oil prices may lead the central bank to further tighten monitory policy.''
Pakistan's central bank unexpectedly lifted its benchmark interest rate by half a percentage point to 10 per cent on July 31, citing the "worrisome" increase in food prices.
Food and beverages
The cost of food and beverages jumped 12.2 per cent in December from a year earlier, according to yesterday's report. Clothing and footwear prices rose 8.6 per cent.
Wheat prices in the South Asian nation, the world's sixth- largest consumer of the grain, have risen by more than 20 per cent since November as the government's failure to curb illegal exports led to a shortage in the domestic market.
An 80-kg bag of wheat flour sold for a record Rs2,000 ($32) on January 7 after riots cut supplies, said Fareed Qureshi, chairman of the Karachi Retail Market Association.
Higher global crude oil costs may also force Pakistan to increase local pump prices in coming months, further stoking inflation.
The caretaker government of Prime Minister Mohammedmian Soomro, appointed in November by President Pervez Musharraf to prepare for February's elections, has so far avoided taking the unpopular step of raising fuel costs.
The State Bank of Pakistan is expected to release its next monetary policy statement in Karachi in the last week of January.
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