CPI Preview: Inflation to climb above 12% YoY in June

June 28, 2024 (MLN): Headline inflation is expected to inch slightly higher to around 12.3% YoY in June 2024.

After two consecutive monthly declines, MoM inflation is projected to rise by 0.25%. That compares with the last 12-month average increase of 0.95% MoM.

Accordingly, this will take the average yearly inflation of fiscal year 2023-24 to 23.4% YoY compared to last year's average inflation of 29.2%.

The Food index is projected to inch up by 11 basis points (bps) on a monthly basis.

Major changes include a decline in the prices of wheat, rice, bread, and garlic. However, this fall is offset by a significant surge in the price of tomatoes, which has increased by over 65%.

Meanwhile, Transport index is anticipated to decrease significantly by 4.1% amid deflated fuel prices.

The Housing Index is projected to rise 1.33% due to a rise in electricity charges, primarily attributable to the FCA adjustment in electricity costs.

Inflation Sensitivity

If consumer prices rise an average 0.5% a month going forward, annual inflation will drop to about 3.4% by end-December 2024.

With a 0.95% monthly increase, which is the last 1-year average, annual inflation will fall to about 6.6% by December.

Meanwhile, with an average monthly increase of 1.84%, which is the last 2-year average, annual inflation will stand at 13.4% by December.

The following chart maps out the yearly inflation trajectory based on monthly inflation rates of 0.5%, 0.95%, and the last 2-year average of 1.84%

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