Pakistan’s inflation rate has decelerated to its lowest level in nearly four years, with consumer prices increasing by 6.9%in September compared to the previous year. This figure was notably below market expectations of 7.5% and marks the lowest inflation rate since January 2021. In September 2023, inflation was recorded at 31.4%, highlighting a significant improvement.
According to the Pakistan Bureau of Statistics (PBS), this development brings the average yearly inflation for the first three months of FY25 to 9.2%, a substantial decrease from 29.0% in the same period last year.
On a monthly basis, the Consumer Price Index (CPI) fell by 0.5% in September, contrasting with a 0.4% increase in August and a 2.0% rise in September 2023. Core inflation, which excludes food and energy costs, rose by 10.4% year-on-year in September, down from 11.9% in August and 22.1% in September 2023. Monthly core CPI also increased by 0.3% in September, compared to 0.5% in August.
The slowdown in inflation was driven primarily by decreases in fuel and food costs. Specifically, transport costs fell by 7.3% year-on-year, influenced by a significant drop in international oil prices, while food prices declined by 0.6%compared to the previous year.
Here are the key metrics:
| Metric | Sep-24 | Aug-24 | Sep-23 | 3MFY25 | 3MFY24 |
|---|---|---|---|---|---|
| CPI MoM | -0.5% | 0.4% | 2.0% | 0.7% | 2.4% |
| CPI YoY | 6.9% | 9.6% | 31.4% | 9.2% | 29.0% |
| Core CPI MoM | 0.3% | 0.5% | 1.6% | 0.6% | 1.7% |
| Core CPI YoY | 10.4% | 11.9% | 22.1% | 12.0% | 21.4% |
Recently, Pakistan secured a $7 billion loan package from the International Monetary Fund (IMF), which has also adjusted its inflation forecasts for the country, now predicting average consumer price increases of 9.5% for FY25, down from an earlier estimate of 12.7%.
With the CPI-based inflation rate at 6.9% and the policy rate at 17.5%, the real interest rate now stands at 10.6%. The State Bank of Pakistan (SBP) has reduced interest rates by a cumulative 450 basis points since June.
The notable decline in inflation provides policymakers with increased flexibility to continue monetary easing to stimulate economic growth.
