Fresh from the unprecedented hike in house rent index last month, the headline inflation continued to surge north – recorded at 4.19 percent for May 2018. Core inflation in May 2018 also remained high at 7 percent – for second consecutive month – which is a 44 month high. And that had sent enough signals to the monetary policy committee, which saw the policy rate go up by 50 bps.

The inflation on a monthly basis remained in check, much closer to the 11M month-on-month average at 0.51 percent. But the trick was already done by the house rent index based 1.8 percent month-on-month increase last month, which could potentially anchor higher rounds of inflation till the next quarterly update in the house rent index.

The month-on-month inflation is almost single handedly carried by food inflation, with almost 80 percent share in total impact. The increase in perishable food items is understandable, as the holy month of Ramadan is often taken as an opportunity to make more money. In year-on-year terms, the impact was more evenly distributed, although the house rent, water, electricity sub category contributed a little over one-third to the 4.19 percent increase.

The currency depreciation along with high core inflation is expected to continue anchoring inflation expectations. Add to the fore, the house rent mystery, which would only be known in August for July inflation numbers, whether it was a one-off, or there is a change in PBS’s computation of the same, following intense criticism over the years.

Talking of computation, the breakup of different categories provided by the PBS with its detailed summary of monthly inflation, does not add up. Adding the individual components with their respective weights and inflation recordings, the CPI year-on-year change stand at 4.54 percent for May 2018, significantly higher than the reported 4.19 percent. This is not implying that the PBS is fudging. But surely, an explanation would do well, as the sum of parts, does not add up to the final tally.