ISLAMABAD: In a recent analysis, JS Global, a leading brokerage firm, has forecasted that Consumer Price Index (CPI)-based inflation in Pakistan is expected to remain substantial at 27.9% on a year-on-year (YoY) basis for January.
This prediction shows a slight decrease from the 29.7% recorded in December 2023.
JS Global’s preview of the CPI for January 2024 indicates another month of elevated food inflation, along with a quarterly increase in house rent, contributing to consistently high headline numbers.
The brokerage house expects a month-on-month (MoM) increase of 1.8% in the food segment, resulting in an overall 1.5% MoM increase in the headline CPI, bringing the YoY estimate to 27.9%.
Despite the lower pace compared to the previous two months, averaging around 29.5%, JS Global attributes this moderation to a high base, initiating a disinflation trend.
The brokerage house clarified that these estimates do not account for the Rs8/ltr decrease announced in petrol prices mid-month.
Considering the latest price cut, the headline CPI estimate is adjusted to a slightly lower 27.8%, with the MoM increase trimming to 1.4%.
JS Global also highlighted expectations of price increases, ranging from 13% to 29% MoM, in essential food items such as chicken, eggs, onions, and tomatoes, indicating a resumption of the strong momentum of food inflation.
In December 2023, food inflation experienced a brief decline with a sequential decrease of 49 basis points MoM.
However, on a YoY basis, the high base set last year is expected to limit the increase to 23.6%, compared to the recent average of 27%, marking the lowest in the last 20 months.
Looking ahead, JS Global predicts CPI-based inflation to stand at 24% for FY24 and 16% in CY24. This forecast takes into account factors such as semi-annual gas price increases, regular power tariff adjustments, steady global oil prices, and gradual PKR depreciation.
Notably, the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP), in line with expectations, maintained the key policy rate at 22% last month.
The MPC expressed its anticipation of a significant decline in headline inflation in the second half of FY24, citing contained aggregate demand, easing supply constraints, moderation in international commodity prices, and a favorable base effect.
The central bank’s projection for average inflation in FY24 remains in the range of 20–22%.
