SBP cuts interest ....
jected to maintain upward trajectory.
As expected, headline CPI inflation sustained its rising trend for the seventh consecutive month and on YoY basis rose to 4.2 percent in April 2016 from the low of 1.3 percent in September 2015.
In addition to the seasonal impact of perishable food items and services, this increase owes to further waning of the base effect and second round impact of decline in oil prices.
Similarly, core inflation measures have broadly followed a rising trend in this fiscal year indicating buildup of underlying inflationary tendencies. Despite these trends and developments, the inflation outlook for FY16 is low. However, going into FY17 inflation is likely to attain a higher plateau. Major sources that would determine this path are as follows:
First, relatively faster pickup in demand compared to its gradually improving supply dynamics could lead inflation on a higher side. Second, rising global oil price along with modest recovery in non-energy commodity prices will pass on to the domestic consumer prices.
Third, some risks, such as imposition of new taxation measures and increase in electricity and gas tariffs, if realized would put upward pressure on CPI inflation.
Expansion in industrial activities and services sector would salvage some of the lost momentum to GDP growth due to the losses from cotton and rice crops. Recovery in Large-scale Manufacturing, which grew by 4.7 percent during Jul-Mar FY16 compared to 2.8 percent in Jul-Mar FY15, is expected to continue further on account of improving energy and security conditions.