Pakistan’s inflation likely to drop to lowest level in 6.5 years

ISLAMABAD: Pakistan’s inflation is expected to continue its downward trajectory with the Consumer Price Index (CPI) projected to reach 4 per cent this month, the lowest level in 6.5 years, according to JS Global.

The report says that after recording 4.9 per cent reading in November, the CPI is anticipated to slide to 4 per cent in the ongoing month. The brokerage attributed the drop to favourable base effect following the high inflation seen in the previous year.

However, JS Global noted that there might be a slight increase of 1 basis point (bps) in monthly headline inflation. “This would bring the average inflation for the first half of FY25 to 7.3 per cent, down from 28.8 per cent in the same period last year,” the report stated.

In November, Pakistan’s inflation dropped to its lowest point since May 2018, registering 4.9 per cent year-on-year, according to data from the Pakistan Bureau of Statistics. This figure was also lower than October’s 7.2 per cent.

JS Global also forecast core inflation for December to reach 10.8 per cent year-on-year, with a month-on-month increase of 80 bps.

Meanwhile, food inflation for the same month is expected to remain largely unchanged, showing a negligible rise of 0.03 per cent year-on-year, compared to last year’s 27.5 per cent, with a month-on-month decrease of 23 bps.

The report further noted that high real interest rates provide room for further cuts in the policy rate.

“Despite the recent 200 bps reduction in the policy rate this month, bringing the total cuts over the past six months to 900 bps, the sharp disinflation has kept real interest rates elevated. This strengthens the case for the Monetary Policy Committee to continue its rate-cutting cycle in its next meeting,” it added.

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