Pakistan’s headline inflation eases to 11.1 per cent in July: PBS report

ISLAMABAD: Pakistan’s headline inflation eased to 11.1 per cent year-on-year in July 2024, marking a decline from June’s 12.6 per cent and reaching its lowest point since November 2021, when it was 11.5 per cent.

This reduction, according to the Pakistan Bureau of Statistics (PBS), signals a noteworthy improvement in the inflation outlook.

However, on a month-to-month basis, the Consumer Price Index (CPI) rose by 2.1 per cent in July, a sharp increase from the 0.5 per cent rise recorded in June.

The July inflation figure also fell short of the finance ministry’s forecast, which anticipated a rate between 12 per cent and 13 per cent. This figure is below the predictions of several brokerage houses, including Foundation Securities and JS Global, both of which had projected a CPI of 10.5 per cent for July.

The recent inflation data comes on the heels of the State Bank of Pakistan’s (SBP) decision to reduce its key policy rate by 100 basis points, bringing it to 19.5 per cent. This move aimed to address inflation risks stemming from fiscal imbalances and sudden energy price adjustments.

Despite this, analysts believe that a combination of past monetary tightening, a favourable base effect, improved domestic crop yields, and stable exchange rates will contribute to a significant decline in inflation in fiscal year 2025.

Urban inflation decreased to 13.2 per cent year-on-year in July, down from 14.9 per cent in June and 26.3 per cent in July 2023. Month-to-month, urban inflation rose by 2.0 per cent compared to 0.6 per cent in June.

Rural inflation also fell to 8.1 per cent year-on-year in July, down from 9.3 per cent in June and 31.3 per cent in July 2023, with a month-to-month increase of 2.2 per cent compared to 0.3 per cent in June.

Overall, despite a slight uptick in monthly figures, the easing annual inflation rate suggests improving economic conditions and effective monetary policy interventions.

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