EUR 3.54 For Business Accounts Only

Intermarket Pulse: Pakistan Economy: Jun’17 CPI expected to be 4.34%YoY

• We estimate Jun’17 CPI/NFNE to clock in at 4.34%/5.44%YoY (down 25bps/up 7bps MoM), driven majorly by an uptick in Food prices (up 1.19ppt MoM and 4.51ppt YoY). Note that Jun’17 CPI is below preceding 3m average of 4.9%YoY majorly on account of a significant drop in the price of K2 cigarette (down 23%MoM), which contributes to a weight of 1.4% to CPI basket.

• CPI is expected to close FY17 at 4.2%YoY (vs. 2.9%YoY in FY16). Looking ahead, we project FY18F CPI to clock in at 5.3%YoY, with impetus from the impact of recently announced budgetary measures. Downside risks include soft international oil prices.

• Despite recent jump in CPI, T-Bill auction results indicate the market’s expectation of no major changes in SBP’s monetary policy stance in the short run. Cut off yields of 3M/6M T-Bills remain unchanged at 5.99%/6.01%. However, yield on 12M T-Bills has notched up a few basis points to 6.05%.