Pakistan’s headline inflation for November 2024 expected to drop below 5 per cent

ISLAMABAD: Pakistan’s headline inflation is expected to ease to 4.6 per cent year-on-year (YoY) in November, marking a significant drop from the 29.2 per cent YoY recorded during the same period in 2023.

This also reflects a stark decline from the 7.2 per cent YoY inflation seen in November 2022, bringing the country’s inflation rate to its lowest point since April 2018.

This latest inflation figure represents a dramatic reduction from the peak rate recorded 1.5 years ago, when it soared nearly tenfold higher. Analysts attribute this cooling to a fall in food and transport costs, which helped offset an uptick observed in the previous month.

Such a sharp decline in inflation is likely to encourage the State Bank of Pakistan (SBP) to consider another interest rate cut of up to 150 basis points in its upcoming policy meeting. This would follow the bank’s ongoing effort to ease monetary conditions as inflationary pressures subside.

For the first five months of the fiscal year 2025 (5MFY25), average inflation is projected at 7.9 per cent YoY, a sharp decline compared to the 28.6 per cent YoY average for the same period in the previous fiscal year.

On a month-on-month (MoM) basis, consumer prices are expected to rise by around 0.3 per cent, driven by an increase in housing and transport costs. This compares to a more pronounced 1.3 per cent MoM increase in October 2024.

The housing index is predicted to climb by 0.9 per cent from October, largely due to a rise in liquefied petroleum gas (LPG) prices. However, this increase will be tempered by a negative fuel charge adjustment (FCA), as the Pakistan Bureau of Statistics (PBS) has yet to account for changes in electricity base tariffs.

In fact, PBS data indicates that consumers paid less for electricity this November compared to last year, thanks in part to a three-month subsidy that capped price increases for users consuming up to 200 units of electricity. The subsidy ended in September, but its effects remain unadjusted in official inflation data.

Transport costs are expected to rise by 1.2 per cent MoM due to higher petrol and diesel prices, though the transport index will still be 2.5 per cent lower than a year ago. A stable exchange rate and a drop in global oil prices have allowed the government to reduce fuel costs, offering some relief to consumers.

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