CPI inflation may drop to lowest level since January 2021

ISLAMABAD: Pakistan’s inflation rate is expected to drop to 7.5 per cent year-on-year in September, marking a decrease from August’s 9.6 per cent and the lowest rate since January 2021. This indicates a steady decline in price increases over the year.

On a month-to-month basis, inflation is predicted to remain mostly stable. Lower transport and food costs are set to balance out a rise in electricity prices. Transport costs, in particular, are expected to decrease significantly by 6.6 per cent compared to the previous year, as global fuel prices have fallen.

Food prices are also forecasted to ease slightly, dropping 0.4 per cent from last month. This would result in a modest annual increase of just 0.4 per cent, with lower prices for chicken and wheat thanks to stable supplies.

However, housing inflation remains a key concern, with an annual rise of 22.5 per cent—the steepest among all categories. On a monthly basis, housing costs are likely to increase by 0.8 per cent, mainly driven by higher electricity and gas prices.

These costs are expected to climb further in October, as the government prepares to raise energy prices to meet the conditions set by the International Monetary Fund (IMF) for a new loan.

Prime Minister Shehbaz Sharif had previously introduced a three-month relief plan, freezing electricity prices until October. Housing-related expenses, particularly energy costs, are now the biggest driver of the Consumer Price Index (CPI), contributing to more than half of the overall inflation increase.

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