ISLAMABAD: Pakistan’s headline inflation rate declined for the fifth consecutive month to 11.8 per cent in May and the State Bank of Pakistan (SBP) is likely to lower the policy rate, says S&P Global Market Intelligence.
The analysis was produced by S&P Global Market Intelligence, not S&P Global Ratings, which is a separately managed division of S&P Global.
Key highlights from the analysis include; the realized headline consumer price index (CPI) inflation of 11.8 per cent for May was considerably lower than the market expectations, mainly on the back of a notable deflation in food prices, led by perishables.
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Inflation is projected to continue its declining trend in the coming months, majorly owing to favourable base effects.
However, it is expected to remain in the double-digit range, with S&P Global Market Intelligence forecasting an average monthly year-over-year inflation rate of 13.7 per cent for 2024.
Due to elevated inflation, heightened global financial market uncertainty, and the upcoming budget announcement in June, the SBP maintained its policy rate at 22 per cent during its April 29 meeting.
However, the recent softening in headline inflation increases likelihood of SBP lowering its policy rate in June 2024. Overall, S&P Global Market Intelligence projects a cumulative 450 basis point reduction in the policy rate by the end of 2024.
Copyright Business Recorder, 2024
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