IGI Securities Limited – Day Break

Karachi, March 28, 2019 (PPI-OT):Economy – Expecting a 25bps policy rate hike; Monthly inflation to record a +8.7%YoY growth

For the month of Mar-19, we expect headline CPI inflation to print a +8.7%YoY (+8.2% last month) which close to a 5-yr high, Key assumptions that feed into our estimates are +1.2%MoM increase in food prices and ~2% rise in domestic petroleum prices

We expect a 25bps further rate hike taking policy rate to 10.75% and discount rate to 11.0%, leaving forward real rates close to ~3.5%.

Recent improvements in country’s C/a balance and foreign funding will eventually ease up external balance, however fiscal management still pose a challenge.

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