Pakistan’s inflation expected to fall below 3% in January

The downward trajectory of CPI-based inflation is likely to continue in Pakistan, with projections indicating it could drop below 3% in January, said market experts.

“Ongoing sharp disinflation trend is expected to persist, with Jan-2025 CPI likely to fall to 2.8% (lowest since Nov-2015 owing to a high base affect), despite 0.6% MoM uptick,” said JS Global in a report on Wednesday.

“This would take 7MFY25 average inflation to 6.7%, down from 7MFY24 average of 28.7%,” it added.

A similar reading was also given by another brokerage house, Ismail Iqbal Securities Limited, in its recent report.

“Inflation for Jan’25 is projected at 2.9%, sharply down from 28.3% the same period last year, reflecting a significant easing in price pressures,” said the brokerage house.

In December 2024, Pakistan’s headline inflation clocked in at 4.1% on a year-on-year basis, a reading below that of November 2024 when it stood at 4.9%, showed Pakistan Bureau of Statistics (PBS) data.

The brokerage houses noted that the consistent decline in inflation readings gives impetus to the central bank for a further cut in the key policy rate.

“In our view, the persistent decline in inflation, settling at higher single digits from May 2025, strengthens the Monetary Policy Committee’s (MPC) case for continuing the easing cycle,” said JS Global, which expected another cut this month, albeit a relatively smaller reduction of 100 basis points (bps,) compared to the sharp cuts so far.

Ismail Iqbal also shared a similar sentiment, forecasting a 100 bps cut in the upcoming policy meeting, “followed by a cautious pause or minor cuts to monitor inflation trends”.

“While the current inflation environment is favourable, pressures may reemerge starting May 25 as the base effect diminishes, potentially pushing headline inflation upward,” it added.

Last month, the MPC of the SBP decided to cut the policy rate by 200 bps to 13%. Cumulatively, the policy rate reduced by 900 bps since June during the last five consecutive monetary policy decisions.