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March’s Headline Inflation Is Expected To Be Around 20%

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March's Headline Inflation Is Expected To Be Around 20%

(CTN News) – CPI-based inflation in Pakistan may fall further to around 20% in March, lower than the 23.1% recorded in February on a year-on-year (YoY) basis.

In a report on Thursday, Arif Habib Limited (AHL) reported that the YoY headline inflation rate for March 2024 is expected to be 20.2%, down from 23.1% reported in February 2024.

Also, headline inflation is likely to decline significantly compared to 35.4% YoY during the same period last year (March 2023). Consequently, the average CPI for 9MFY24 is expected to remain flat at around 27.2% YoY, mirroring the figures observed during SPLY,” said the brokerage house.

The AHL projections for March 2024 suggest a 1.3% increase increase of 1.7% over 8MFY24.

Food inflation (+1.3% MoM), transport inflation (+1.5% MoM),

Housing inflation (+2.9% MoM) are the primary factors behind the increase in monthly inflation.

Ramadan-induced increases in the fresh fruit, potato, onion, and tomato prices are expected to drive the food index up, driven by the Ramadan factor. A rise in gas tariff and LPG prices is expected to contribute to the housing index increasing. Additionally, petroleum product prices are expected to increase MoM, which will keep the transport index elevated.

The AHL forecast stated that headline would decline mainly because of a significant base effect, but noted that fluctuations in food prices, potential currency depreciation, rising international oil prices, and fiscal/budgetary actions following the entry into a new International Monetary Fund (IMF) programme could affect these forecasts.

Another brokerage house, IGI Securities, predicted a growth of 20.3% in national CPI.

According to the report, the monthly growth rate in March 2024 is expected to be 1.4%, compared to 0.0% in February.

The price of meat, potatoes, onions, tomatoes, and sugar increased over the previous month, while the price of chicken, rice, eggs, and wheat flour decreased. An increase in fuel prices is expected to result in a modest increase of 0.8% in the transportation index during March 2024.

Due to a high base effect, IGI Securities also anticipates CPI to remain on a downward trajectory in the near future, similar to the projections of AHL.

In spite of this, new tax measures recommended by the IMF would have an inflationary impact on Pakistan because it intends to enter a long-term programme.

SBP’s Monetary Policy Committee (MPC) noted at its last meeting that inflation remains high, its outlook is susceptible to risks due to elevated expectations despite the sharp deceleration in February. The current monetary stance must be maintained to bring inflation down to the target range of 5–7% by September 2025.”

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