Elixir Securities Limited – Elixir Insight

Karachi, April 04, 2016 (PPI-OT): Pakistan Economy Rising Inflation Warrants Status Quo in MPS!

Headline inflation (CPI) during Mar-16 inched up 0.15% MoM leading YoY inflation to 3.94%, increasing average inflation for 9MFY16 to clock in at 2.64% vis-a-vis 5.1% in 9MFY15.

Perishable food inflation jumped by 4.5% in Mar-16 relative to deflation in preceding three months mainly because of increase in the prices of chicken, fruits and vegetables.

Core inflation has also shown continual surge as NFNE and trimmed core registered 4.7%YoY and 3.8%YoY increase, persistently rising from Oct’15.

Given increase in retail inflation expected to average 4.0% in Jun-16 (4QFY16 average of 3.9%) and thereby reducing RIR to 2.9% from 3.9% in 9MFY16, Elixir Securities Limited reiterates Elixir Securities Limited’s view of status quo in Policy Rate. However, any surprise increase in inflation post Federal Budget FY17 may call for monetary tightening in order to keep RIR in the positive zone.