The Pakistan Bureau of Statistics (PBS) has recently released the figures of Consumer Price Index (CPI) for July-13. The CPI for this month was recorded at 8.26 percent YoY, signalling towards rising trend, however, the economic observers believe the State Bank of Pakistan is expected to leave the current 9 percent discount rate (DR) intact until the reveal of inflation in upcoming months.
The CPI inflation for July 13, surprisingly, came out to be well above the market consensus of 8 percent YoY and was recorded at 8.26 percent YoY, up by 2.02 percent MoM as compared to 9.6 percent in July 12. The core inflation measured by non-food non-energy CPI (Core NFNE) reached at 8.2 percent during July 13 in comparison with 11.4 percent during Jul-12.
On monthly basis, the baseline inflation crept up by 2.02 percent in Jul-13 against 0.72 percent a month earlier. The major upsurge was witnessed in food and non-alcoholic beverages (34.83 percent weight), housing, water, electricity, gas and fuels (29.40 percent weight) and transport (7.20 percent weight) groups due to monthly increase in prices of tomatoes by 79.8 percent, potatoes by 24.9 percent, fresh fruit by 13.6 percent, wheat by 3.5 percent and wheat flour by 2.42 percent.
Meanwhile, in non-foods items, cigarettes by 11.9 percent, footware by 6.3 percent, tailoring by 3.72 percent and house rent by 2.54 percent on monthly basis. “Therefore, a rising trend on monthly basis was observed in the CPI during Jul-13,” said Abdul Azeem of InvestCap Research.
The analyst expects that a normalized CPI post August-13 should determine any change in the monetary policy, as during July 13 high inflation was seen due to rising GST and Ramadan effect. “Therefore, we foresee the discount rate to remain unchanged in the upcoming monetary policy decision,” said he. However, the analyst said, upcoming negotiation with the International Monetary Fund could influence the stance of monetary policy towards tightening.
