KARACHI: Consumer Price Index (CPI) for the month of November 2019 clocked in at 12.7% YoY as compared to an increase of 11.0% YoY registered in October 2019. On a MoM basis, CPI incremented 1.3% in November 2019 versus a rise of 1.8% registered in the previous month.

With regards to inflationary trend in urban & rural areas, urban inflation arrived at 12.1% YoY compared to a higher 13.6% YoY rural inflation.

The trend was similar for food inflation which was clocked-in at 16.6% for urban and 19.3% for rural areas during the month. Moreover, core inflation was lower in urban (+7.5%YoY) compared to rural (+8.4%YoY) during Nov’19.

Heavyweight food & non-alcoholic beverages group (CPI weightage 34.58%) was the primary driver behind surge in inflationary pressure during the month (+19.4%YoY) whereas housing & utilities group (+8.8%YoY) and transport (+14.0%YoY) were other major contributors in Nov’19 headline inflation reading.

Consequently, average 5MFY20 inflation stood at 10.8%YoY compared to a much lower reading of 6.1%YoY clocked-in during the same period last year.

With regards to inflation outlook for FY20, we anticipate avg. CPI accretion to range within 11.0%-12.0% for the current fiscal year which is in-line with SBP and IMF’s revised forecast. Predominant factors behind double-digit inflationary level for FY20 include significant hike in food prices, higher gas/power tariff, domestic POL prices at elevated levels & lagged impact of PKR devaluation.

In terms of monetary policy implications, State bank of Pakistan (SBP) kept key policy rate unchanged at 13.25% in the last monetary policy committee meeting of the year.

“With next monetary policy stance to be unveiled in Jan’20, we highlight subsidence in food inflation as the primary factor which could lead to initiation or delay in reversal of interest rate cycle,” a report issued by Pearl Securities said.