KARACHI: The headline inflation based on Consumer Price Index (CPI) may increase to 26 per cent in January 2023, analysts said on Friday.
Analysts at Arif Habib Limited are expecting January 2023 inflation to settle at 25.8 per cent YoY compared to 24.5 per cent in December 2022 and 12.96 per cent in January 2022, respectively.
With this, average inflation for July – January of 2022/2023 clocks-in at 25.2 per cent compared to 10.24 per cent in the same period of the last fiscal year.
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The YoY uptick in CPI will likely be led by Food (40.5 per cent YoY), Transport (36.8 per cent YoY), Housing (6.3 per cent YoY), Restaurants & Hotels (27.8 per cent YoY), Household Equipment (30.0 per cent YoY), Recreation & Culture (42.4 per cent YoY), Clothing & Footwear (16.6 per cent YoY) and Miscellaneous (26.6 per cent YoY).
On a MoM basis, CPI reading is expected to increase 1.47 per cent. This month, according to the analysts, MoM inflation will remain under pressure mainly on the back of a surge in prices of food items.
The Food Index is expected to post an increase of 3.3 per cent MoM in January 2023. As per Sensitive Price Index (SPI) data published by the Pakistan Bureau of Statistics (PBS), increase in average prices of wheat, onions, chicken and dry fruits will keep the inflation in-check.
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On the other hand, decline in prices of tomatoes and potatoes is likely to provide support to the food index.
The analysts said headline inflation will remain elevated in the remaining months of the current fiscal year before slowing down with the onset of the new fiscal year.
They expect that pressure mainly emanating from any further energy tariff hikes, weaker currency against the greenback and surge in food prices.
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On the monetary policy front, SBP increased the benchmark policy rate by 100bps to 17 per cent in January 2023 policy. In its statement, SBP mentioned that high levels of CPI have been noted and could pick up higher if not “unchecked.”
Hence, the committee felt strongly that inflation must be anchored, as the long term costs of letting it become entrenched outweighs the immediate costs of bringing it down, so as to embark on a path of price stability and sustainable growth.
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