1.5% increase expected in Pakistan’s inflation

WEB DESK: In a recent analysis, JS Global, a prominent brokerage house, predicted that the Consumer Price Index (CPI)-based inflation in Pakistan is poised to persist at a substantial 27.9 per cent on a year-on-year (YoY) basis for January.

This projection reflects a slight decrease from the 29.7 per cent recorded in December 2023.

JS Global’s preview of the CPI for January 2024 indicates another month of elevated food inflation, coupled with a quarterly uptick in house rent, contributing to sustained high headline numbers.

The brokerage house anticipates a month-on-month (MoM) uptick of 1.8 per cent in the food segment, translating to an overall 1.5 per cent MoM increase in the headline CPI, bringing the YoY estimate to 27.9 per cent.

Despite the lower pace compared to the previous two months, which averaged around 29.5 per cent, JS Global attributes this moderation to a high base, instigating a disinflation trend.

The brokerage house clarified that these estimates do not incorporate the Rs8/ltr decrease announced in petrol prices mid-month.

Considering the latest price cut, the headline CPI estimate is adjusted to a slightly lower 27.8 per cent, with the MoM increase trimming to 1.4 per cent.

JS Global also highlighted expectations of price increases, ranging from 13 per cent to 29 per cent MoM, in essential food items such as chicken, eggs, onions, and tomatoes, indicating a resumption of the strong momentum of food inflation.

In December 2023, food inflation experienced a brief decline with a sequential decrease of 49 bp MoM.

However, on a YoY basis, the high base set last year is expected to limit the increase to 23.6 per cent, compared to the recent average of 27 per cent, marking the lowest in the last 20 months.

Looking ahead, JS Global predicts CPI-based inflation to stand at 24 per cent for FY24 and 16 per cent in CY24. This forecast incorporates factors such as semi-annual gas price increases, regular power tariff adjustments, steady global oil prices, and gradual PKR depreciation.

Notably, the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP), in line with expectations, maintained the key policy rate at 22 per cent last month.

The MPC expressed its anticipation of a significant decline in headline inflation in the second half of FY24, citing contained aggregate demand, easing supply constraints, moderation in international commodity prices, and a favourable base effect.

The central bank’s projection for average inflation in FY24 remains in the range of 20–22 per cent.

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