The headline inflation for September 2021 is likely to remain 8.27 percent as compared to 9.04 percent in August 2021 and 8.35 percent in September 2020. Analysts at Arif Habib Limited in a report issued on Tuesday estimated the Consumer Price Index (CPI) on the basis of the Sensitive Price Indicator (SPI) data published by the Pakistan Bureau of Statistics (PBS) and other adjustments. They said the estimated CPI for September 2021 will take the first quarter of the fiscal year 2021-22 at an average inflation to 8.3 percent vis-à-vis 8.9 percent in the same period last year. Monthly inflation has been forecast at 1.5 percent for September 2021, compared to the average monthly inflation of 0.9 percent in the first two months of the current fiscal year. The key factor for CPI reading is expected to be food inflation, to be up 3.1 percent on a month-on-month basis, given higher prices of poultry, wheat and fresh vegetables. Under the food basket, onions (+26 percent MoM), fresh vegetables (+11 percent MoM), wheat flour (+6 percent MoM), eggs (+9 percent MoM) and chicken (+32 percent MoM) would be the major contributors behind the monthly surge, while the major laggards that would lower the impact will be tomatoes (-13 percent MoM). Going forward, with the government’s recent decision to intervene in the market to control prices of food items, the food inflation should ease off. The house rent index is expected to witness an uptick of 1 per cent MoM, owing to a surge in the electricity charges with the average prices likely to increase 7 per cent MoM during September 2021. The analysts project inflation to average under 8.5 per cent till November 2021 with the base effect supporting the YoY numbers. However, as this base effect starts to fade away post-December 2021, we will see a gradual rise in the headline inflation during the second half of the current fiscal year. Any abrupt change in tariffs, exchange rate parity and oil prices pose an upside risk to the inflation estimates. On the monetary policy front, in its September 2021 policy, the State Bank of Pakistan (SBP) finally resumed monetary tightening by hiking the benchmark policy rate by 25basis points to 7.25 per cent. The Monetary Policy Committee, as previously, reiterated that the policy response should be a transition from prioritising growth to now ensuring sustainability. Although inflation remains contained, vigorous domestic growth coupled with multi-year high international commodity prices are expected to stress the current account.