Pakistan weekly inflation down for sixth consecutive week

Pakistan's weekly inflation decreased by 0.21% for the sixth consecutive week, ending February 6.

Major decreases were observed in the prices of tomatoes (-11%), potatoes (-6%), onions (-4%), chicken (-4%), and pulse gram (-2%). Compared to the same week last year, the weekly Sensitive Price Indicator (SPI) clocked in at 0.2%, the lowest in seven years.

Conversely, there were significant price increases for bananas (3.25%), diesel (2.67%), sugar (1.78%), petrol (0.38%), powdered milk (0.07%), and cooking oil 5 liters (0.04%).

Pakistan's economy has seen a remarkable turnaround following a period marked by peak inflation rates of 38% in May 2023.

By January 2025, inflation significantly eased to 2.7%, reflecting the effectiveness of stringent monetary and fiscal policies, alongside stabilizing energy and food prices.

Analysts attribute the initial success in curbing inflation to base effects. The rapid escalation of energy prices driven by geopolitical tensions could not sustain its steep upward trajectory, leading to a moderation in year-over-year increases.

Additionally, the sharp rise in food prices, initially exacerbated by shortages, has begun to stabilize. These developments, coupled with disciplined monetary and fiscal measures, have played a pivotal role in reducing inflationary pressures.

The impact of higher interest rates is increasingly evident, as they systematically alleviate inflationary pressures on the headline Consumer Price Index (CPI). The momentum of rising prices is diminishing, signaling that monetary tightening is gradually bringing inflation under control.

In its latest Monetary Policy Statement, the State Bank of Pakistan (SBP) stated that they do not anticipate any upside risk for food inflation and energy prices.

Headline inflation has fallen sharply compared to core inflation. Current forecasts suggest that inflation may further decline, averaging around 6.5% in FY25, down from FY24's average of 23.4%.