Annual inflation falls 12-year low of 4.5 per cent

Kathmandu: The annual average consumer price inflation (CPI) moderated to 4.5 per cent in 2016/17 from 9.9 per cent in the previous year.

The annual average inflation of 2016/17 has been the lowest since 2004/05. The inflation rate of 4.5 per cent has been lower than its target of 7.5 per cent in 2016/17.

Only in other two occasions, 2003/04 and 2006/07, actual inflation has been lower than its target ever since the Nepal Rastra Bank (NRB) began issuing the annual monetary policy in 2002/03. The higher base price of the preceding year, improved supply situation and lower global prices including that of India contributed to inflation easing in the review year, according to the current microeconomic report issued by NRB.

The year-on-year (y-o-y) consumer price inflation dipped to 2.7 per cent in mid-July 2017 from 10.4 per cent in the previous year. The y-o-y inflation rate has been the lowest since October-November 2004.

The decline in prices of ghee and oil, pulses and legumes, vegetable, transportation, among others were mainly responsible for a fall in overall consumer price inflation in the review year.

While the average food inflation eased to 1.9 per cent in 2016/17 from 10.9 per cent in the preceding year, the nonfood inflation moderated to 6.5 per cent in the review year from 9.2 per cent a year ago.

The decline in prices of ghee and oil (6 per cent), pulses and legumes 3 (5.5 per cent) and vegetable (2.5 per cent) drove down overall food inflation in the review year, NRB said.

Ecological region-wise, the Hilly region witnessed a relatively higher annual average rate of inflation of 6.4 per cent followed by Terai region 4.4 per cent, Mountain region 4.1 per cent and the Kathmandu Valley 3.1 per cent in the review year.

The annual average wholesale price inflation eased to 2.7 per cent in 2016/17 from 6.3 per cent in the previous year. A significant deceleration in prices of agricultural commodities and the decline in prices of imported commodities eased overall wholesale prices.

In contrast to retail and wholesale prices, the annual average salary and wage rate index saw a growth of 14.4 per cent in 2016/17 compared to a rise of 5.8 per cent in the previous year. In the review year, the salary index and the wage rate index witnessed a growth of 18.7 per cent and 13.4 per cent respectively. The hike in pay scale of civil service drove up the salary and wage rate index in the review year.