Karachi, May 22, 2023 (PPI-OT): May-2023 CPI expected to peak at 37%, base affect to kick in from June

We preview May-2023 CPI, where we expect the data point to clock in at a record-high of 37.27%, as current workings suggest

another sequential increase of 1.07% MoM. On the core front, we expect NFNE inflation to clock in at 30%, another record- high reading, with MoM increase of 2.7%.

We expect May-2023’s reading to be the peak for inflation readings, after which despite a MoM increase, we expect the YoY trend to soften on account of base affect from Jun-2023. The same is also expected to lead to monetary easing during 2HFY24.

To recall, CPI, on a 12M fwd. basis averages at 23.6% as per our estimates, reflecting ~250bp negative real interest rates from current Policy Rate of 21%. On an 18M fwd. basis, the average clocks in at 19%, reflecting positive real interest rates of 200bp.