LAHORE - As the CPI inflation has clocked in at 2.1 per cent in April 2015, after a gap of more than 12 years, mainly due to sharp drop in oil prices and lower food inflation, the experts are anticipating that the State Bank of Pakistan (SBP) might cut policy rate by another 50bps to 7.5 per cent in 2015.
They said that fixed income secondary market is also anticipating a rate cut as cut-off yield in latest T-Bill auction conducted on April 29, 2015 declined by 54-56bps.
They said that lower oil prices and food inflation will keep inflation on lower side in FY15. Hence, they anticipate inflation to remain in the range of 4.5-5 per cent in FY15 as against 8.6 per cent in FY14. The govt’s FY15 inflation target was at 8 per cent, while SBP revised estimate is 4-5 per cent.
For FY16, they anticipate that the inflation would remain in the range of 5.5-6.5 per cent due to expected increase in oil prices and anticipated rise in aggregate demand.
Data shows that on month-on-month basis, CPI inflation increased by 1.3 per cent after 9 months versus an increase of 0.2 per cent in Mar 2015 and an increase of 1.7 per cent in April 2014. MoM increase in inflation is attributed to higher food inflation, uptick in house rent index and education index. Food inflation with a total weight of 34.8 per cent in CPI increased by 1.5 per cent MoM as compared to 0.5 per cent in the previous month. Housing, water & fuel index having a weight of 29.4 per cent in CPI also increased by 0.7 per cent MoM in Apr 2015 versus 0 per cent in Mar 2015 and 1.4 per cent in Apr 2014.
On the other hand, education segment witnessed an increase of 8.6 per cent as compared to 0.1 per cent in Mar 2015 and 9.6 per cent in Apr 2014. Transport index having a weight of 7.2 per cent in CPI increased by 0.8 per cent MoM versus a decline of 0.1 per cent in Mar 2015 as govt increased prices of diesel and petrol by 4-5 per cent during the month of Apr 2015.
Core inflation in Apr 2015 clocked in at 5.4 per cent as compared to 5.9 per cent in Mar 2015, indicating low inflationary pressures in the economy. In 10MFY15, core inflation stood at 6.8 per cent versus 8.2 per cent in the same period last year.
Inflation in 10MFY15 stood at 4.8 per cent as compared to 8.7 per cent in the same period last year as significant decline in oil prices kept overall CPI in check.