Karachi, October 26, 2021 (PPI-OT): Headline inflation to recede temporarily to 8.2% in Oct-21

Pakistan’s broad inflation for Oct-21 is expected to clock in at 8.2% as food inflation loses some traction from a higher base last month and more fuel inflation is yet to seep into CPI as the latest increase in POL product prices will not get exhibited till next month.

A few more things to look at during Oct-21 inflation is the housing index from quarterly adjustment, the restaurant index from easing of lockdowns and the recreation index from opening up of schools.

On a MoM basis, we do not expect food inflation to soar at a pronounced rate similar to the 4% jump in Sep-21, that has set a higher base for Oct-21.

Government’s efforts of intervening the domestic market and softening food inflation seem to have largely paid off since major rise was only witnessed in the invariably volatile chicken and tomato prices.

Oil and other energy prices continue to surge to multi-year highs and most of the food inflation has continued to remain stubborn owing to pent-up demand from the pandemic. The jump in energy costs and upcoming electricity tariff adjustments make a case for second-round impacts of inflation and increase in long-term inflation expectations, which will likely be more visible during 2HFY22.