Pakistan Economy: Inflationary concerns pose key threat to ongoing reforms! (AKD Daily, Feb 03, 2020)
Pakistan Economy: Inflationary concerns pose key threat to ongoing reforms!
- Pakistan’s National headline inflation climbed to 9yr high of 14.56%YoY in Jan’20 (vs. 12.63%YoY in Dec’19 and 5.60%YoY in Jan’19), surpassing the consensus expectations of 13.6% by a wide margin. Sequentially, the CPI index jumped 1.98%MoM.
- The surprise came on many counts including i) higher than expected food inflation (actual: 23.6%YoY vs. expected: 21.1%YoY), ii) one-off sharp increases in marriage hall charges and personal care products prices, and iii) higher quarterly housing rent adjustment (rural only).
- Near term inflation outlook remains uncertain, with a multitude of factors at play including price normalization in certain food items, timing and scale of utility rate adjustments, and fiscal considerations.
- From monetary policy vantage, Jan’20 surprise may lead to a delay in easing cycle beyond 2HFY20 with consequent adjustments in easing magnitude for the year. We will be keenly watching upcoming inflation numbers to revise our base case of 150bps rate cut in CY20.
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