Pakistan inflation expected to clock in at 2.0-2.5% in February, says brokerage house

Pakistan headline inflation is expected to remain between 2.0-2.5% in February 2025, nearly flat against 2.4% recorded in the previous month, said brokerage house Topline Securities in a report on Friday.

Inflation in Pakistan has been a significant and persistent economic challenge, 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.

The January’s figure was lowest in 111 months, according to a Topline statement earlier, while experts attributed the decline in inflation to a high base effect and lower food inflation.

In February, Pakistan’s Consumer Price Index is expected to clock in at 2.0-2.5% year-on-year, taking 8MFY25 average to 6.07% compared to 27.96% in 8MFY24, the Friday’s report said.

“During February 2025, food Inflation is expected to decline by 0.4% MoM [month-on-month] mainly on the back of 55% decrease in prices of tomatoes, 27% decline in onion prices and 21% decline in potatoes prices. While, prices of fresh fruits, and sugar are expected to increase by 9-15%,” it read.

Housing, water, electricity and gas segment is expected to witness approximately 0.2% MoM decline due to 8% decline in LPG prices and 0.5% decline in electricity prices amidst higher negative fuel cost adjustment (FCA), the report added.

“Transport segment is expected to witness increase of 1.2% MoM on the back of increase in petrol and diesel prices by 2-4%.”

However, any major deviation in commodity prices from current levels might result in change in inflation estimates, the report mentioned.

For the financial year 2025, the brokerage house maintained an average inflation forecast of 6.0-7.0%.

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 favorable base effect,” the MPC said then.