According to the data published by PBS, Consumer Price Index (CPI) for May’22 is expected to arrive at 14.3% YoY, driven by food prices, particularly wheat 20kg bag (+17%), chicken (+16.5%), eggs (+10.7%), onion (+30.6%) and pulses (+4%). At the same time, some perishable items recorded a d decline in prices which contained the growth in food inflation to 2.8% MoM.

Additionally, edible oil prices recorded a 1.3% growth due to an increase in palm oil prices since Indonesia banned palm oil exports last month. At the same time, the country has now lifted the ban on exports which will aid in moderating the prices iThe housing. The housing index is expected to record a 1.2% MoM decline in inflation due to a reduction in electricity tariffs. In contrast, data released, while other components of the housing group, including gas charges, remain unchanged along with cement the prices.

In the latest development, the Central Bank has increased the policy rate by 150bps to 13.75% to keep demand-side pressures in check. While the Government has kept petroleum prices unchanged, we believe the much-anticipated reversal of fuel and electricity subsidies will cause a further spike in inflation in the upcoming months.

Courtesy- AHCML Research