The central bank is expected to keep easing the monetary policy stance as the analysts foresee inflation to stand slightly above than 7 percent during the month of October, official figures for which are yet to be revealed.
This contraction in the price hike is mainly attributed to a decline in the prices of oil and some food items during the month in review that, the analysts at InvestCap Research estimate, would see the Consumer Prices Index (CPI) to clock in at 7.13 percent.
“We expect food index to post decline of 1.01 percent MoM, due to the decline in the prices of fresh fruits by 20 percent MoM (weight 1.9 percent) coupled with falling prices of edible and vegetable oil,” said a InvestCap Research in its inflation report issued Tuesday.
In addition, the report said, minor contraction witnessed in petroleum product prices on monthly basis by 1 percent, diesel and petrol both, was another major factor supporting the above forecast of the aforementioned decline in CPI during Oct-12.
“The CPI has been on continuous decline since Aug-12, we foresee this trend in CPI to keep its pace and to bring down CPI to 8.75-9.0 percent for FY13, on the moving average basis, owing to high base impact coupled with weak aggregate demand,” said the report.
In the next monetary policy that is expected to be held during the first week of December, the SBP is expected to continue its monetary easing stance.
“We estimate further 50-100bps cut in the policy rate in the mentioned monetary policy,” the report said.
Pressure on Pak rupee worth against the greenback is expected to be exerted by the heavy upcoming payments of USD2.3bn to the IMF. Furthermore, any upward movement in international oil prices will result in increase of oil import bill.
Additional burden is seen to be provided by the low cotton output in the form of lower exports, combination of both is highly likely to increase the trade deficit of the country. Additionally, current account deficit is also estimated to be between 2-2.25bn USD (GDP 0.9-1.0 percent), depressing the forex reserves of the country.