Pakistan’s inflation eases to 6.5 year low of 4.07%

Pakistan's CPI inflation eased to 4.07% in December, the lowest in 81 months, primarily driven by the base effect and lower food basket prices. CPI was recorded at 4.9% in November.

The average inflation in the first half of current fiscal year is 7.22%, which is significantly lower than 28.79% in the same period last year.

Inflation averaged at 13.2% in 2024 compared to 30.9% in 2023, depicting a notable slowdown.

In response, the central bank has slashed the policy rate by 900 basis points from 22% in June to 13% in December.

These monthly back-to-back low YoY inflation readings are primarily due to the high base effect, supported by a decline in food and housing indices.

Additionally, if global commodity and energy prices remain stable and the PKR continues to hold steady, it will provide further support to the inflation outlook, keeping price pressures contained.

Looking ahead, inflation is expected to average 7% in FY25 and increase gradually post 1QCY25.

Overall, CPI inflation was up 1.2% in October, mainly due to an 8.8% rise in perishable food items.