May inflation likely to range between 2.7-3% in Pakistan

Pakistan's inflation rate in May is likely to range between 2.7-3% as the high base effect starts fading with price trends normalizing.

According to a report of brokerage house JS Global, Pakistan's Consumer Price Index (CPI) is expected to clock in at 2.7% for May.

This is likely to take the average inflation during fiscal year 2024-25's 11 months to to 4.7%, down from an average of 24.9% during the same period last year.

Due to the rapid disinflation during the year, CPI forecast for FY25 averages 4.6%. The rolling 12-month forward CPI estimate stands at around 5.7%, according to JS Global.

According to a report of Al-Habib Capital Markets, inflation in May is expected to clock in at 3.0%, up from 0.3% in April and down from 11.8% in May last year, as base effects continue to fade.

On a monthly basis, CPI is likely to decline by 0.6%, posting the second consecutive drop, mainly due to a 2.3% fall in food prices amid improved supply of perishables. However, poultry shortages are expected to push egg and chicken prices up by 32.8% and 20.7%, respectively.

The transport index is expected to decline by 0.7% due to lower fuel prices, while the clothing and footwear index is projected to rise by 1.2%.

On a year-on-year basis, food inflation is anticipated to ease to 0.9%, but non-food inflation is likely to remain elevated, led by healthcare (+12.5%), education (+10.4%), clothing (+9.9%), and restaurants (+8.4%).

Amid declining inflation, the State Bank of Pakistan (SBP) reduced the key policy rate by 100 basis points to 11% in the last Monetary Policy Committee meeting.

JS Global expects a further rate cut of 50-100bps in the near future.

The SBP's Monetary Policy Committee is scheduled to meet on June 16.