Karachi, April 04, 2022 (PPI-OT): Electricity relieves inflation in Mar-2022
Mar-2022 CPI clocked in at 12.72%, lower than our estimates as lower than expected prices of chicken were realized in food inflation whereas housing index saw a major sequential decline owing to lower electricity charges from the Relief Package.
Cooking oil and ghee prices rose 7% MoM and 10% MoM, respectively, during Mar-2022. We believe this will continue to be a contributing factor for inflationary pressures, going forward.
The Core-Urban and Core-Rural inflation have jumped significantly during Mar-2022 to 8.9% and 10.3%, respectively, pointing strongly towards strong inflationary pressures in the near-term. We believe an adjustment of up to 100bps in the policy rate is vital to overcome the rising external pressures.
Pakistan headline CPI clocks in at 12.72%
Mar-2022 CPI clocked in at 12.72%, lower than our estimates as lower than expected prices of chicken were realized in food inflation whereas housing index saw a major sequential decline owing to lower electricity charges from the Relief Package that aimed to reduce tariff by Rs 5/unit.
It is pertinent to note that the current print of Mar-2022 incorporates relatively lesser chicken prices than current levels, indicating that chicken price spikes caused by the outbreak of Lumpy Skin Disease are yet to seep in properly in food inflation.
On the other hand, the inflationary pressures from rising electricity costs subsided during Mar-2022 from the Relief Package. However, the housing index will likely see a jump next month in Apr-2022 on account of quarterly house rent adjustment.
Cooking oil and ghee prices rose 7% MoM and 10% MoM, respectively, during Mar-2022. We believe this will continue to be a contributing factor for inflationary pressures going forward (please refer to our note titled: Mar-2022 to bear highest monthly inflation in FY22).
Core inflation is worrisome
The Core-Urban and Core-Rural inflation have jumped significantly during Mar-2022 to 8.9% and 10.3%, respectively. This points strongly towards strong inflationary pressures in the near-term as well as demand conditions which may unlikely be influenced strongly by a change in monetary policy setting, in case of Pakistan.
This does not take away the possibility of increase in monetary tightening for Pakistan. We believe an adjustment of up to 100bps in the policy rate is vital to overcome the rising external pressures.