Higher loan-repayment rates means further cost-push inflation
. Thus, manufacturers find they have been hit with a double whammy of higher wages and higher debt servicing at a time when they need to be able to export more.
KARACHI -- Industry leaders on Friday strongly opposed the possible withdrawal of the 5th Schedule of Customs Act fearing it would not only render domestic industry uncompetitive but also unleash fresh wave of cost-push inflation
in the country.
finally acknowledged the near-uselessness of the rate increase on inflation as higher prices were driven by 'cost-push inflation
' on which an increase in interest rates has negligible effect.
The downward pressure on the rupee as well as cost-push inflation
will drive inflationary pressure and increase the cost of construction materials, although the increase may be limited as prices have increased significantly in 2018, according to the first issue of AIIB publication: 'Asian Infrastructure Finance 2019: Bridging Borders: Infrastructure to Connect Asia and Beyond'.
In the latest ING market commentary following the government's December inflation announcement, it said cost-push inflation
is "seen to dissipate further in coming months."
According to Mapa, the 2018 inflation zoomed well-past BSP's inflation target as a confluence of bad weather, disrupted supply chains, currency depreciation and tax reform fomented cost-push inflation
The reduction in oil export duties has led to the depreciation of the ruble and worsening of the terms of trade of the Russian economy, which has resulted in cost-push inflation
and adverse supply shocks in the country.
Accelerated growth can sometimes spur higher levels of prices in terms of demand-pull and cost-push inflation
. The central bank may be forced to raise interest rates, which may conflict with the general objectives of growth and development by raising the cost of funds and reducing money in circulation.
The Vice President of FPCCI argued that the increase in P.O.L prices would have multiplier affect on trade and industry and economic activities as it would further spur cost-push inflation
; increase cost of transportation of raw material and consumer goods; inflate cost of production etc.
'The exorbitant increase will further spur cost-push inflation
by increasing the cost of transportation of raw material and consumer goods.
But it is impossible for this to happen now." Building on Hamaqy, economics expert Wael el-Nahas explains, "Citizens did not feel a decrease in prices because the effect of the currency flotation is still in place, which can be understood from their unchanged incomes." He adds that prices continue to increase, not powered by a rise in demand or the purchasing power, but rather "due to higher costs of production factors; which is called cost-push inflation
." "Prices cannot drop unless production exceeds consumption.
While the rising Y-O-Y rate has been affected mostly by the rise in oil prices since last year (and much less by recent tax increases, as commonly and inordinately blamed), the slowing M-O-M rate should ease worries that the economy is 'overheating.' It also suggests that the real time effect of tax increases on cost-push inflation
have largely already come in, rising Y-O-Y rates notwithstanding.