Consumer price inflation slowed again in February, decelerating to 12.9% year on year from 14.2% in January and 15.5% in December 2010. The figure for February was also just lower than the year-earlier 13% rate of inflation. Overall, price rises continued to be led by high food-price inflation, which registered 17.7% in that month, compared with 20.4% in January. Medicine prices increased by 16.3% year on year in February, and transport and communication prices rose by 12.3%.
In its most recent monetary policy statement, the SBP noted that expectations of high inflation were becoming entrenched. It cited three factors responsible for the trend of declining price rises: the reduction of the impact on food prices of the catastrophic flooding of August-September 2010; the government's failure to pass rising international oil prices to consumers and a reduction in official borrowing from the SBP. It stated that inflationary trends in the months ahead would depend on government policy regarding fuel subsidies and central-bank borrowing.