Consumer Price Index (CPI)-based inflation in Pakistan is expected to remain elevated, and could clock in at 27.9% on a year-on-year (YoY) basis in January, lower than 29.7% in December, said a brokerage house JS Global on Tuesday.

“We preview CPI for Jan-2024, where we expect another month of higher food inflation and quarterly house rent uptick to keep headline numbers elevated.

“With a MoM (month-on-month) uptick of 1.8% expected in the food segment, we expect headline CPI to clock in at 1.5% MoM, taking Jan-2024 YoY CPI estimates to 27.9%,” it said.

The brokerage house was of the view that pace would be lower than reported inflation in the last two months, which averaged at ~29.5%.

“The decline in pace would be due to a high base, leading to a disinflation trend,” it said.

JS Global shared that its estimates do not include the Rs8/ltr decrease announced in petrol prices at the mid of the month. “Adding the latest round of price cut, our headline CPI estimate slightly reduces 27.8%, where MoM increase trims to 1.4%,” it said.

JS Global was of expected food items such as chicken, eggs, onions and tomatoes to witness price increases in the range of 13% - 29% MoM, resuming the strong momentum of food inflation.

“To recall, food inflation witnessed a breather in Dec-2023 as it reported a sequential decline of 49bp MoM. On a YoY basis, however, the high base set last year is expected to limit the increase to 23.6%, vis-a-vis recent average of 27% and lowest in the last 20 months.

The brokerage house expects CPI-based inflation to clock in at 24% for FY24 and 16% in CY24. “We incorporate semi-annual gas price increases, regular power tariff adjustments, steady global oil prices and gradual PKR depreciation,” said JS Global.

Last month, the Monetary Policy Committee (MPC) of the SBP, in line with expectations, had kept the key policy rate unchanged at 22%.

MPC said that it expected headline inflation to decline significantly in the second half of FY24 due to contained aggregate demand, easing supply constraints, moderation in international commodity prices and favorable base effect

The SBP projected an average inflation for FY24 in the range of 20-22%.


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