Brokerage House: Inflation To Decline In February, Possibly Reaching 23.5%

(CTN News) – Consumer Price Index (CPI)-based inflation in Pakistan is expected to decline in February to 23.5%, down from 28.3% in January, according to brokerage house Arif Habib Limited (AHL).

As reported by the report, the projected YoY headline inflation rate for February 2024 is expected to be 23.5%, reflecting a decline from the previous month, January 2024.

In view of this, it is expected that the average CPI for 7MFY24 will be 28.1% YoY, as opposed to the 26.2% YoY rate recorded in 7MFY23.”

According to the report, the average core inflation for February is expected to reach 18.6%, down from last month’s figure of 20.8%.

According to AHL’s projections for February 2024, the company expects a month-over-month increase of 0.4%, a contrast to the 1.93% average increase over the first seven months of FY24.

Specifically, the brokerage house noted that the rise in inflation is most likely to be attributed to increases in the transport index (+2.5% MoM) and housing index (+2.0% MoM), while the food index is expected to decrease MoM (-0.9%).

Food indexes have dropped for the third consecutive month, and this can be attributed to a decline in the price of items such as eggs, onions, tomatoes, oil and ghee, which have all been declining in price.

The housing index is further expected to increase due primarily to an increase in the price of gas, which we have taken into account in our base case assumption, which is expected to result in a rise in housing prices… As a result of a MoM increase in the cost of petroleum products, it is expected that the transport index will remain elevated moving forward.

The brokerage house anticipates that, in the future, headline inflation will decrease because of the significant base effect that has been observed so far.

It should be noted, however, that the forecasts might be affected by factors such as fluctuations in food prices (associated with Ramadan), a possible depreciation in the Pakistani rupiah against the dollar, and the continuous rise in the price of international oil.

In line with expectations, the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) kept the key policy rate unchanged at 22% last month.

The MPC has revised upward the inflation projection for fiscal year 2023-24 from 20-22% to 23-25%, taking into account the recent increases in energy tariffs.

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