Karachi, January 31, 2025 – Pakistan’s inflation rate for January 2025 is projected to hit a 10-year low at approximately 2.7%, marking the lowest level since March 2015.
This decline in inflation is attributed to a favorable base effect, stable global commodity prices, and a relatively stable domestic currency.
Analysts at Insight Research highlight that while inflation is witnessing a downward trajectory on a Year-on-Year (YoY) basis, a slight Month-on-Month (MoM) increase of around 50 basis points (bps) is expected. This marginal uptick is primarily due to a rise in the housing index, which reflects the impact of quarterly house rent adjustments.
In the food basket, higher chicken prices have been largely offset by a seasonal dip in vegetable prices, contributing to the overall inflation trend. For the first seven months of FY2024-25 (7MFY25), the cumulative inflation rate is expected to stand at 6.6%, a significant decline compared to 28.7% recorded during the same period last year.
A closer look at the Sensitive Price Indicator (SPI) basket reveals notable price fluctuations. Items that recorded price hikes include chicken (33.2%↑), sugar (5.2%↑), pulse mong (5.9%↑), fresh fruits (4.1%↑), and cooking oil (3.6%↑). Conversely, prices of key essentials witnessed a decline, including tomatoes (28.5%↓), potatoes (27.4%↓), onions (15.8%↓), eggs (14.5%↓), and pulse gram (3.2%↓).
The State Bank of Pakistan (SBP) has revised its inflation projection for FY2024-25, lowering its estimate from the earlier forecast of 11%-13% to 5%-7%, aligning with analysts’ expectations of approximately 6.5%. The central bank has implemented a cumulative 1,000 basis points (bps) reduction in the policy rate since June 2024, following a faster-than-anticipated decline in headline inflation.
While early indicators suggest economic improvement, experts warn that core inflation remains sticky, and any disruption in global commodity prices could threaten the recently achieved stability. Policymakers remain cautious, as the full impact of the aggressive monetary easing is yet to be fully reflected in the economy.