- CPI-based inflation in November rose just 0.5% month-on-month.
- Reading well below the financial division’s projection.
- Strengthens the case for a higher reduction rate than expected.
Exceeding official forecasts, inflation in Pakistan slowed to 4.9% year-on-year in November 2024, from 7.2% in October, marking its lowest level in six and a half years, according to data released by the Bureau Pakistani statistics. (PBS) Monday.
On a monthly basis, inflation based on the consumer price index (CPI) increased by 0.5% in November, compared to an increase of 1.2% in October and a rise of 2.7% in November 2023.
Average headline inflation during the first five months of FY2025 stood at 7.88%, significantly lower than the 28.62% in the corresponding period of FY2024.
According to a Topline Securities report, this is the lowest inflation figure in 78 months, since April 2018.
The November figure also came in well below official forecasts, signaling a significant cooling in price pressures.
Last month, the Finance Ministry, in its monthly economic report, said inflation was expected to slow to 5.8%-6.8% in November and then further to 5.6%-6.5% in December. .
“Inflation is expected…to decline further to 5.6% – 6.5% by December 2024,” the Finance Division said in its Monthly Economic Update and Outlook.
The State Bank of Pakistan (SBP) cut interest rates by 250 basis points in early November in a bid to revive a sluggish economy amid a sharp decline in the inflation rate.
The fall in inflation should allow the central bank to maintain its monetary easing path.
Since June, the SBP has cut its benchmark interest rate by 700 basis points, bringing it down to 15% last month.
According to a Bloomberg survey, economists expect the policy rate to fall further to 13.5% by the end of the current fiscal year in June 2025.
Inflation fell sharply to 7.2% in October, after reaching a multi-decade high of almost 40% in May 2023, while it was slightly above 6.9% in September 2024, data shows from PBS.
The central bank said inflation could ease further in coming months due to subdued demand and better food supplies. On the other hand, the International Monetary Fund projects an average consumer price increase of 9.5% in 2024.