January 1, 2020 (MLN): The focus on today will be on inflation data i.e. Consumer Price Index (CPI) for the month of December 2019, released by Pakistan Bureau of Statistics (PBS).

The forecasts of analysts from several brokerage houses for the CPI numbers on the basis of previous performance and current economic issues are listed below:

In keeping with market consensus, CPI is projected to stand at 12.59% YoY within a range of 12.41% – 13% in December 2019, as compared to 5.4% YoY in the same period last year and 12.7% YoY in the month of November 2019.

The projected inflation rate is mainly subject to food and housing index which have grown significantly by 19.5%YoY and 9.14%YoY respectively due to unfavourable climate and supply disruption following Pak-India tension, resulting in higher food prices as per Summit Capital research.

However, normalized perishable food prices especially decline in tomatoes and onion prices and meagerly decline in POL prices are major factors driving inflation lower monthly.

Keeping in view, the recent hike in international oil prices due to strengthening relationship between US-China and expected hike in gas price proposed by OGRA from Jan 2020 may keep the inflation elevated in coming months as per the research of AKD.

According to Abbasi and company’s calculation, urban CPI inflation (UCPI) (60% of NCPI) and rural CPI inflation (RCPI) (40% of NCPI) are expected to increase by 12.1% YoY and 13.2% YoY respectively.

Considering the progressing macroeconomic situation, the SBP had kept the policy rate unchanged at 13.25% in its last MPC meeting. It is expected that rising pressure on inflation would remain till Feb’20, therefore, anticipating the first rate cut in 2QCY20 as per Arif Habib research.

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