CPI Inflation ends FY20 with 8.6% YoY in Jun’20

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Pakistan Bureau of Statistics released the CPI Inflation data for Jun’20. CPI Inflation clocks in at 8.6% Y/Y during Jun’20 compared with a reading of 8.2% recorded during May’20 and 8.0% during Jun’19. On a cumulative basis, average inflation is 11.0% during FY20 compared with 6.8% recorded during FY19.


Food Inflation offset the drop in petroleum prices.

Food inflation during Jun’20 escalated by 2.10% MoM due to a considerable hike in prices of key items including Eggs (+21.71%), Tomatoes (+13.09%), and Wheat Flour (+12.00%) Due to its higher weight, food inflation was able to offset the reduction in domestic fuel prices, which reduced the transport index by ~1.06% MoM. Ultimately, monthly inflation grew by 0.82% MoM during Jun’20.

Real interest rates temporarily hovering in the negative region

After the recent cut in interest rate by 100bps to 7.0%, real interest rates are now expected to hover in the negative region. For Jun’20, real interest rate is negative 1.60%. In addition, government has revised the petroleum prices up for this month with an estimated MoM impact of 0.66% towards CPI. The GoP, however, has allowed the import on wheat, a move expected to normalize the commodity’s prices onwards. Consequently, anticipated decline in food inflation will likely offset the impact of higher domestic petroleum prices.

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