Macroeconomic Forecast Pakistan

Headline consumer price inflation (CPI) ticked up for the second straight month in January to 11.0% y-o-y, from 10.1% in the preceding month, posing upside risk on our end-FY2011/12 (July-June) CPI forecast of 9.0%. Core inflation similarly ticked higher for the second consecutive month, coming in at 10.6% y-o-y (up from 10.2% in January). The February uptick was mainly due to a rise in food and transport inflation to 10.6% y-o-y (from 9.3%) and 18.8% (from 14.8%) respectively. Despite the latest figures, we continue to expect disinflation given the ongoing weakness in money supply growth.

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