Karachi: Pakistan’s inflation is projected to fall further in December 2024, with the Consumer Price Index (CPI) anticipated to register at 4%, according to a report released by JS Global on Tuesday. If realized, this would mark the lowest inflation rate in 6.5 years, continuing the sharp disinflationary trend witnessed in recent months.
Key Highlights
- December CPI Outlook
- CPI for December 2024 is expected at 4%, down from 4.9% in November.
- This would result in an average inflation rate of 7.3% for 1HFY25, significantly lower than the 28.8% average in 1HFY24.
- Core and Food Inflation
- Core Inflation: Estimated at 10.8% YoY for December, with a 0.8% MoM increase.
- Food Inflation: Expected to remain almost flat on a YoY basis (+0.03%), with a 23bp decline MoM.
- Drivers of Disinflation
- A favourable base effect from last year’s elevated inflation levels.
- Stabilization in food prices and easing supply-side pressures.
- Monetary Policy Impact
- The State Bank of Pakistan (SBP) recently reduced the key policy rate by 200 basis points in its latest Monetary Policy Committee (MPC) meeting, bringing it to 13%.
- This marks the fifth consecutive rate cut since June 2024, when the policy rate stood at 22%.
- Elevated real interest rates (RIR) provide further room for the SBP to continue its easing cycle in upcoming meetings.
Recent Inflation Trends
In November 2024, Pakistan recorded its lowest inflation rate since May 2018, at 4.9% YoY, a significant drop from 7.2% in October 2024. The report attributes the ongoing trend to effective monetary policies and improved economic conditions.
Outlook
JS Global emphasized that the disinflation trend bolsters the case for further rate cuts to stimulate growth. With inflation stabilizing and food prices easing, policymakers are likely to prioritize measures that sustain economic recovery while maintaining financial stability.
The SBP’s next MPC meeting is expected to reflect this sentiment, with additional rate cuts anticipated if the inflation trajectory remains favorable.
