Pakistan inflation seen hitting 11-month high in September

Pakistan’s inflation is expected to climb to an 11-month high in September, with the Consumer Price Index (CPI) projected to rise between 6.5% and 7% year-on-year compared with 3.0% in August and 6.93% in September 2024, according to Topline Securities.

Research analyst Myesha Sohail said the reading would be the highest since October 2024, while the 3.1% month-on-month increase marks the steepest in 26 months. The surge is being driven largely by food shortages caused by ongoing floods.

The food segment is expected to post an 8.75% month-on-month rise, an all-time high. Key contributors include tomatoes (+122%), wheat (+49%), wheat flour (+39%), and onions (+35%). Prices of potatoes rose 5.4%, rice 4.3%, chicken 4.1%, eggs 3.5%, and sugar 2.7%. Fruits are expected to remain flat, while vegetable prices overall are forecast to decline about 10% month-on-month.

The housing, water, electricity, and gas category is likely to fall by 0.24% in September due to a 2.19% decline in electricity charges. This reflects the quarterly tariff adjustment (QTA) of PKR -1.8881/kWh for August through October and a fuel charges adjustment (FCA) of PKR -1.7856/kWh, compared with PKR -0.7772/kWh in August. However, the drop in power tariffs was partly offset by a 2.75% rise in liquefied petroleum gas (LPG).

The transport segment is forecast to decline 1.25% month-on-month, driven by a 2.7% fall in motor fuel costs. Petrol prices remained unchanged, while high-speed diesel dropped 5.3%.

With inflation in the 6.5-7.0% range, real interest rates will rise to 400-450 basis points, well above Pakistan’s historic average of 200–300 bps.

Topline cautioned that global commodity price shifts remain a key risk that could alter the inflation outlook in the months ahead.