Karachi, March 02, 2022 (PPI-OT): Feb-2022 CPI at 12.24% – Policies key to outlook

Pakistan’s CPI inflation clocked in at 12.24% for Feb-2022 as food (perishables) and fuel inflation continued to remain high. Swings in commodity prices notwithstanding, we believe reported inflation numbers will also be impacted by government policies.

Recent policy moves are likely to have contrasting impacts on fiscal side and inflation. The fiscal contraction which was brought about through Finance (Supplementary) Act 2021 seems to be reversed with the recent relief package announced by PM.

While government continues to balance the requirements of the IMF program with the need to provide relief to the masses, prolonging of Russia-Ukraine tensions and resultantly high commodity prices continue to make that balancing act tougher.

On the monetary policy front, we maintain our call of a 50bp hike but it will be interesting to see the monetary stance adopted to complement the recent lax fiscal measures.