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Pakistan Economy_Inflation surprise means nothing for monetary policy, (AKD Daily, Aug 04, 2020)

AKD Daily

Pakistan Economy: Inflation surprise means nothing for monetary policy

  • Well above consensus estimate, headline inflation for Jul’20 came in at 9.30%YoY vs. 8.59%YoY in the last month and 8.40%YoY in Jul’19. The surprise came on account of higher than expected price hikes in perishables (i.e. vegetable prices) and housing rent.
  • On a MoM basis, inflation jumped 2.50%MoM (vs. 0.82%MoM in Jun’20 and 1.89%MoM in Jul’19) - a record high monthly rate since the rollout of new inflation methodology. The key drivers were food inflation (3.86%MoM) on the sudden spike in certain perishables, transport (9.6%MoM) following reversal of Gov’t administered POL product prices, and quarterly housing rent adjustment. 
  • Food inflation spiked 17.79%YoY (vs. 14.56%YoY in the last month and 8.19%YoY in Jul’19) on the back of a steep increase in tomato, other fresh vegetables, and wheat prices ahead of Eid-ul-Azha. Another major contributor to the increase in headline inflation was a reversal in POL product prices (revised upward in the range of 26-34%), the impact of which was somewhat offset by a decline in transport fares.  
  • The recent surge in inflation albeit partly due to a transitory increase in perishables further affirms our view that the easing cycle has ended. We do not expect any immediate policy reaction to this from the SBP and continue to believe that it would remain on a ‘long pause’ until a deterioration in external account merits any action.

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AKD Securities Limited
AKD Securities Limited

AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.

AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.

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