The Ramazan effect is likely to be visible in July, 2014’s Consumer Price Index (CPI), particularly the pronounced prices of perishable food items, said the analysts Wednesday.
The analysts at Shajar Research have estimated the Jul’14 CPI to clock in the range of 8.0-8.2 percent versus 8.2 percent in Jun’14 translating from 1.8-2.0 percent MoM against 0.6 percent last month.
“In subsequent months, we foresee the inflation numbers to taper off (particularly in 1HFY15) and estimate FY15 average inflation to 8-8.5 percent which is in line with SBP’s expectation of 7.5-8.5 percent,” they said.
The stable rupee, thanks to improved import cover, exercise of fiscal discipline and relatively improved NDA to NFA ratio, are anchoring down inflation expectations in FY15.
The risk to our assessment comes from exogenous commodity price shock, the analysts said.
Inflation moderation pushing up real positive interest rate north of 200bps (at least in 1HFY15), there is a room emerging for the central bank to cut the policy rate in September.