Economy: Pakistan Bureau of Statistics (PBS) released the CPI numbers on May 04, 2015 for the month of Apr-15. The CPI continued its downward trajectory and further lowered to 2.11%YoY as compared to 2.49% during March’15. However, the yearly inflation figure remained above the market estimates of ~1.8%. In today’s report we present our review for April’15 coupled with outlook on the same.

CPI settled at 2.1%YoY in April’15: During Apr-15, CPI rose by 1.3%MoM as compared to 0.2% a month earlier. Though on yearly basis inflation pace remained sluggish but on monthly basis general inflation moved northward due to increase in prices of perishable food items, similarly in non-food items house rent index, oil, and education heads increased. On yearly basis, according to the PBS data, the CPI dipped further to 2.11%YoY owing to reduced transport fares and perishable food items. The transport costs witnessed downfall by 9.67%YoY due to lower fuel prices which reduced significantly by 20.11%YoY, on the other hand perishable food items fell by 8.46%YoY. During 10MFY15, CPI remained significantly low at 4.81% compared to 8.69% in 10MFY14.

Lower CPI indicates cut in DR: We expect inflation to remain subdued and to settle ~4.5%YoY in FY15, in light of current price trend, whereas in FY16 anticipated CPI would likely to remain in the range of 6% – 7%, even oil prices reverse. The continuously lower CPI inflation along with the drop in T-bills yields indicate a likely cut of 50bps in the upcoming monetary policy in May-15.