Bracing for economic known unknowns

Yearly headline inflation hit 38 per cent in May 2023. This means that on average, the purchasing power of the rupee was down 38 per cent in May compared to May last year. If you have Rs138,000 now, you can buy only as many goods and services worth Rs100,000 a year ago. Or in other words, if you have Rs100,000 now, you can buy goods and services that were worth Rs62,000 a year earlier. Inflation has made life too difficult. Hasn’t it? A pertinent question is: has inflation peaked now? For some obvious reasons, it seems so. From June onwards, we may see inflation — or stagflation to be more appropriate — moderating. Two consecutive cuts in oil prices in May, the last one also accompanied by a cut in LPG prices, and the fact that aggregate demand across sectors has tanked should be a harbinger of inflation easing. If the State Bank of Pakistan (SBP) goes for another interest rate hike or maintains its key policy rate at 21pc in its policy review meeting due in June, that should dampen inflationary expectations.