Brokerage Firms Predict Slight Increase in June Inflation

Two brokerage firms have predicted a slight increase in the Consumer Price Index (CPI) based inflation for June 2024, estimating it to be around 12-13%. This projection continues a downward trend seen since the previous month, with June 2024's CPI expected to be at 12.5% year-on-year. The decrease in inflation is mainly due to the high base effect from the previous year's inflation spike. Despite this, there have been two consecutive monthly declines in CPI, with a significant drop recorded in May 2024.

In May, Pakistan's headline inflation was reported at 11.8% year-on-year, a noticeable decrease from the previous month's 17.3%. The decline is driven by falling food prices, which are anticipated to keep decreasing in June for the third straight month. The expected drop in food inflation in June may lead to a year-on-year food inflation rate of just 0.5%, a marked improvement from the same period last year.

Another brokerage house, in a separate report, projected a year-on-year inflation increase of 12.55% in June, compared to 11.76% in the previous month. This slight rise is linked to a rebound in vegetable prices due to ongoing festivities. While food and fuel indexes are expected to stabilize in the short term, future CPI readings could be impacted by inflationary pressures stemming from recent budget announcements.

The Federal Budget for the fiscal year 2024-25 was presented in the National Assembly on June 12, with measures aimed at tackling inflation concerns. The budgetary steps are seen as less harsh than initially expected, with adjustments made to fuel prices, sales tax rates, and food prices. However, potential upward inflationary pressures are anticipated from July onwards, driven by increases in fuel prices, power tariffs, and gas tariffs.

The inflation trends in Pakistan show a mixed picture, with recent declines attributed to falling food prices. While measures in the Federal Budget aim to address inflation concerns, potential future pressures remain. It is essential for policymakers to monitor these trends closely to ensure stability in the economy.