The economic observers predict the Consumer Price Index (CPI) inflation to stand at 4.90 percent during the outgoing month of December, much to the delight of stocks market participants who would ultimately be reaping the fruits of further monetary easing by the State Bank on the back of easing inflationary pressure in the country.
The projected rate of inflation, which is likely to be unveiled on January 1, shows a slump of 0.94 basis points when compared with 3.96 percent of the preceding month of November.
“On monthly basis, an easing trend is likely to be witnessed as CPI is expected to shrink by minimal -0.43% MoM in Dec-14 versus -0.52% MoM in Nov-14,” viewed analysts at InvestCap Research.
On moving average basis, they said, the CPI was anticipated to remain below 7% by staying at 6.19% for Jul-Dec-14.
The low CPI was mainly due to decline in food and non-alcoholic beverages segment by 0.87% MoM, the analyst said.
In this segment, they said, potato and onion prices, contributing 0.4% and 0.5% weights in total index were expected to fall by 29%MoM and 22%MoM, respectively.
Moreover, a sharp decline in fresh fruit prices by 3.4%MoM was expected to be another contributor behind the decline in CPI during the month, said they.
Furthermore, the analysts said, a substantial decline in POL prices during Dec-14 was also expected to reduce the inflation, as the authority slashed the petrol, diesel and kerosene price by 10%MoM, 7.0%MoM and 5.0%MoM, respectively, during the period under review.
“Resultantly, transportation charges shrunken during Dec-14,” they said.
The declining trend in international oil prices was expected to further reduce CPI for Jan-14, the analyst viewed, adding that low oil prices would also support the trade balance as it consisted 35% of the total import bill.
“Better electricity supply to textile sector is also expected to improve textile exports,” they said.
However, any increase in gas prices from 01’Jan would pull up the inflation as it holds 1.6% weight in CPI basket. “We expect FY15 CPI to settle at 6%,” said the analysts.
