Pakistan’s Inflation Rate for April Likely to Fall Below 60-Year Low

Following a 0.7 percent year-on-year reading in March 2025, the Consumer Price Index (CPI) in Pakistan is expected to drop further to just 0.3 percent year-on-year in April 2025 — the lowest level in six decades, reflecting the country’s sharp ongoing disinflation trend. According to JS Global, this moderation is primarily attributed to falling food inflation and a favourable base effect due to elevated headline inflation during the same period last year. As a result, the average inflation for the first ten months of FY2024–25 (10MFY25) is expected to come in at 4.9 percent, significantly lower than the 26.2 percent recorded during the same period last fiscal year. Food inflation, which holds a 35 percent weight in the CPI basket, is projected to decline by 5.7 percent year-on-year in April 2025, compared to 9.7 percent in April 2024. This drop is largely driven by considerable reductions in the prices of essential food items, including rice, potatoes, tomatoes, wheat, and onions. Meanwhile, core inflation, which excludes volatile food and energy prices, is anticipated to record a year-on-year increase of around 7.7 percent in April 2025, with a month-on-month rise of 40 basis points. Notably, core inflation has hovered around 10 percent for several months, particularly in urban areas. Amid these inflationary developments, anticipation is growing for a further reduction in interest rates. The State Bank of Pakistan (SBP) maintained its policy rate at 12 percent during its last Monetary Policy Committee (MPC) meeting, opting to pause the easing cycle despite the sharp drop in inflation. Over the six MPC meetings held between June 2024 and January 2025, the SBP implemented a cumulative rate cut of 1,000 basis points from the previous peak of 22 percent. The projected average CPI for the full fiscal year FY2024–25 is now estimated at 5.0 percent. This projection assumes stability in global oil prices and in the exchange rate between the Pakistani Rupee and the US Dollar. While the recent increase in the petroleum development levy (PDL) has been factored in, any second-round inflationary impact remains a potential upside risk. The SBP’s next MPC meetings are scheduled for 5th May 2025 and 16th June 2025, during which markets will be watching closely for potential policy rate cuts in response to the sustained decline in inflation.