Pakistan headline inflation is expected to fall to 2.3% in February 2025, slightly lower than 2.4% recorded in the previous month, said brokerage house JS Global in a report on Thursday.
“Pakistan’s Consumer Price Index (CPI) is set to continue with the disinflation trend, with Feb-2025 CPI likely to fall to 2.29% (lowest since Nov-2015 owing to a high base effect).”
This is primarily driven by a favourable base effect from the mounting headline inflation of the previous year, it said. “This would take 8MFY25 average inflation to 6.1%, down from 8MFY24 average of 28%,” read the report.
Inflation has remained a key economic challenge for Pakistan, particularly in recent years. In May 2023, the Consumer Price Index (CPI) inflation rate hit a record high of 38%. However, it has been on a downward trajectory since then.
“Given rapid disinflation, our base case CPI estimate for FY25 averages at 5.7%,” said JS Global. “In our view, an uptick in food inflation would be seen during Ramazan next month.”
Citing its latest market survey, the brokerage house noted that a majority of investors believed that there may be another policy rate cut after the last rate cut announced in January, given that inflation figures are coming in lower than expectations by the broader market
“Based on the lower-than-expected inflation readings thus far, we may see a 100bp cut in interest rates going forward,” it said.
Last month, in line with expectations, the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) reduced the key policy rate by 100 basis points, taking it down to 12%.
“The committee noted that inflation continued to trend downward in line with expectations, reaching 4.1% y/y in December. This trend is driven by moderate domestic demand conditions and supportive supply-side dynamics, amidst favourable base effect,” the MPC said then.
SBP is scheduled to have its next Monetary Policy Committee (MPC) meeting on 10th March 2025.
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