According to a group of analysts, consumer price inflation likely accelerated to a level not seen in over a decade in June as a result of skyrocketing food and energy costs as well as currency depreciation. This confirms expectations that the central bank will increase its benchmark interest rate for the sixth time in a row next month.
According to analysts, consumer price index (CPI)-based inflation will increase from 13.8 percent in May to a range between 18.1 and 19.5% in June. The reading would be the highest since 2009.
Based on recent changes in fuel and other commodity costs, they predicted that the June CPI will increase by approximately 20%. They also stated that “the current situation has been compared with the 2008 situation following the global financial crisis.”
Since the latter week of May, the government has cut unpaid gasoline subsidies twice in an effort to reduce the fiscal deficit and secure an IMF bailout program.
It boosted energy rates and upped the cost of fuel products by Rs. 60 per liter.
By announcing price increases of more than Rs. 84/liter (56 percent) for gasoline and Rs. 119/liter (82 percent) for HSD in less than 4 weeks, the government has so far transferred the burden of subsidy payments to the general public.
The policy rate has been raised by the SBP by a total of 400bps in 2022 and 675bps over the past year.
After the policy rate was increased by 500 basis points in a calendar year in 2008, this was the greatest rate increase since then.
According to Topline Securities analyst Umair Naseer, the country would see an extended period of over 15% inflation, with a peak of 21% in August 2022.
“For June 2022, CPI inflation is likely to remain in the range of 18.5 percent-19.5 percent on YoY basis (3.9 percent-4.8 percent on MoM basis) as per our estimates.”
In contrast to Pakistan’s long-term average inflation rate of 8%, Naseer predicted that in the fiscal year 2023, average inflation will likely be between 15.5 percent and 16.5 percent. He anticipates the CPI for FY24 to be 10%.
To read our blog on “Rising inflation might hinder revenue growth, Snap,” click here.
