Pakistan’s weekly inflation drops amid declining vegetable prices

Pakistan’s short-term inflation saw a decline of 0.35% in the week ending March 20, with reductions in the prices of vegetables and poultry.

Tomatoes experienced the sharpest drop at 7.08%, followed by onions (6.07%), garlic (5.59%), eggs (4.64%), potatoes (2.50%), sugar (0.87%), and firewood (0.60%).

In contrast, the prices of liquefied petroleum gas (LPG) increased by 1.53%, bananas rose by 1.45%, long cloth by 1.23%, bread by 0.55%, and beef by 0.25%.

Sensitive Price Indicator (SPI) saw a decline of 1.20% during the week compared with the same week last year.

The Consumer Price Index (CPI) for March 2025 is projected to range between 0.5% and 1.0%. This would mark the lowest monthly inflation rate in over three decades, bringing the nine-month fiscal year 2025 average to 5.38%, a significant improvement from 27.06% in the same period of fiscal year 2024.

Analysts attribute this trend to high real interest rates, which currently stand at 1,100–1,150 basis points—significantly above Pakistan’s historic average of 200–300 basis points.

According to an analyst at Topline Securities, despite room for a 100-basis-point cut in the policy rate, the State Bank of Pakistan (SBP) may delay further rate cuts until the first half of 2025 due to factors such as the IMF review, fiscal year 2026 budget, and rising imports.

Looking ahead, the central bank forecasts inflation for fiscal year 2025 to remain within a 5–7% range, while fiscal year 2026 estimates suggest inflation could climb to 8–9%. If this estimate holds, analysts say real rates would still be positive by 300–400 basis points.