Inflation trends follow broad money growth and private sector credit growth closely with a lag of about 12 months and above. Given these factors, (i) SBP monitors CPI food and non-food inflation and (ii) two core inflation indictors that (a) excludes all volatile components and constitutes principally of a non-food and non-energy index and (b) another is derived as 20% weighted trimmed mean.
5 While (i) reflects overall price trends, the main driver for monetary policy is the core inflation. On the supply side, price behavior is impacted by structural impediments facing the agriculture and industry sector which ranges from year to year fluctuations in crops and industrial capacity, distributional problems and sometimes hoarding practices.