Another rate cut in the offing: CPI to stay around 7.5% this month

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KARACHI: Consumer price index (CPI) will slightly go up to 7.48 percent year on year (YoY) in December compared to 6.93 percent recorded in November 2012. Sana Taufiq an analyst at Arif Habib Limited said this translates into a sequential month on month (MoM) decline of 0.19 percent against 0.4 percent MoM previous month. With the December 2012 inflation remaining in single digit, the average inflation of first half 2012-13 would further be lower at 8.25 percent.

Analyst believed despite all the concerns of the weaknesses within the economy, the inflation was expected to keep safely below 9 percent as oil prices remained stable (crude down 0.4 percent MoM) and other energy prices, those of gas and electricity did not show any major increase or decrease during the aforementioned period. Similarly the Sensitive Price indicator (SPI) suggests food prices were also under control.

Another rate cut in the offing is expected, considering the economy is still away from the growth target of 4.3 percent, the government will clearly try to re-stimulate consumption next year and also try to cut down on its borrowing cost in order to achieve its target of containing fiscal deficit within 5 percent of the GDP bracket. State Bank of Pakistan may continue with its easing stance by cutting policy rate by another 50bps to 9bps, the analyst said. staff report

Courtesy: Daily Times

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