Energy shock keeps inflation elevated

Business Recorder reported that inflation stayed above 10 percent in five of the last six months, with September's reading at 10.3 percent. That was lower than the 11.1 percent recorded in August but far above the 5.8 percent of September last year. A monthly rise of 1.3 percent reflected a low base effect, sharp increases in energy prices, and higher wheat and other food costs.

Transport and utility indices led the latest monthly gain, with urban motor fuel costs climbing 10.8 percent. Electricity charges rose even faster, driven by a Rs2.1/kWh FCA adjustment that itself climbed 15.3 percent. Monthly food inflation slowed to 0.2 percent in September, though wheat prices are still climbing. The average for the first three months of FY27 was 10.2 percent, and the report expects headline inflation to stay elevated until March 2027.

Core inflation rose only 0.2 percent month on month in September, though it has hovered around 8 to 9 percent over the last six months. The report suggests second-round effects from energy costs have stayed contained, partly because of widespread solarisation in agriculture, households and industry. It also warns that the SBP could raise rates by 50bps at its October 26 review if oil costs fail to ease by a few points within three weeks.