The headline Consumer Price Index (CPI) inflation in the country stood at 5.82 percent Year-on-Year (YoY) during the month of October. This is compared to 7.68 percent YoY recorded last month in September.
This is the lowest inflation reading after Jun-13, 17 months, the Shajar analysts said. “Though we await details, the announced reading is likely arrived on the back of more than expected decline in perishable food items (tomatoes, onions and potatoes etc), non alcoholic beverages category amid decline in petroleum prices,” they added.
On a month-on-month (MoM) basis, the analysts said the inflation stood at 0.22 percent against 0.34 percent recorded last month.
Furthermore, they said the recent 7 to 10 percent decrease in petroleum prices would further exert downward pressure in food items and transport prices in the numbers to come.
Subsequent to the announcement of the Oct’14 inflation readings, the secondary market yields already went down by 50-70 basis points on average, depicting the bond market’s sentiment of an expected cut in interest rate, said the analysts.
Although the reported reading is below street consensus, average inflation for 4MFY15 stands at 7.09 percent versus 8.32 percent, down 123 basis points YoY.
“Considering the increased corridor of real interest rates, we expect the central bank may opt for 50bps-100bps policy rate reduction in the November monetary policy decision,” the analysts said.
