Tuesday, July 18, 2017

Inflation drops to a record low

Consumer price inflation dipped to a record-low level of 2.8 per cent in the 11th month –mid-May to mid-June – of the last fiscal due to improved supply situation and low inflation in neighbouring India, according ot the central bank report. There was unfavourable condition in the country in the previous year which had hit supplies and pushed up prices at a high level. The prices grew at a slower pace since the base was already high in the previous year.
With the prices rising at a slower pace in most of the months of the last fiscal year, the average annual inflation of the country is certain to remain below the 7.5 per cent target of both the budget and Monetary Policy.
Inflation in India during mid-May to mid-June stood at 1.5 per cent. Lower inflation in India directly impacts Nepal as the country also imports inflation due to two-thirds of the total trade with the southern neighbour.
Steep fall in inflation had been witnessed since the beginning of the fiscal year 2016-17 due to high base price of the previous fiscal year, when inflation had skyrocketed along with disruptions in supply lines, according to the current macroeconomic and financial situation of 11 months released by Nepal Rastra Bank (NRB) today.
Food price inflation turned negative one per cent from 11.9 per cent in the corresponding period of the fiscal year 2015-16, the report reads, adding that non-food inflation also moderated to 5.8 per cent from 10.5 per cent in the corresponding period of the fiscal year 2015-16. "The decline in growth rate of prices of clothes and footwear, housing and utilities, communication and health, among others, caused the moderation in non-food inflation,” the report reads.
According to the report, a fall in prices of pulses and legumes by 17.5 per cent, vegetable by 16.3 per cent and ghee and oil by one percent were mainly responsible for such a decline in food inflation. Of food and beverage group, the prices of sugar and sugar products increased 11.5 per cent and alcoholic drinks 10.8 per cent in the review period.
Some analysts say that the inflation has fallen in Nepal as the inflation of India is also on a downward trend in recent months.

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