Karachi, February 03, 2023 (PPI-OT): Pakistan Economy: Jan’23 CPI – Portends further slippages

CPI inflation for the month of Jan’23 clocked in at 27.6%, higher than our estimate of 25.8%YoY inflation for the month, taking the 7MFY23 average to 25.4%.

Food inflation during the month clocked in at 42.4%YoY, which drove the surprise in the CPI reading for Jan’23.

The CPI reading for Jan’23 does not include the effects of the increased petroleum products’ prices (MS and HSD prices have been increased by PkR35/litre), which would be reflected in the Feb’23 reading.

The effect of the weakness in the PkR has not yet been captured by the Jan’23 reading, with the PkR heavily depreciating against the greenback during the tail end of the month.

Core or NFNE inflation clocked in at 15.4%/19.4% in the Urban/Rural baskets during Jan’23, respectively, whereas the trimmed inflation clocked in at 20.9%/27.8%.

Given that inflationary pressures are likely to continue in the foreseeable future, there is a possibility that the SBP may choose to increase interest rates again when it meets on March 16, 2023.