Islamabad, Dec 25: Pakistan’s Consumer Price Index (CPI) is projected to fall to 4.0 percent in December 2024, following a 4.9 percent reading in November. This marks a 6.5-year low, reflecting a continuation of the sharp disinflation trend driven by a favorable base effect from last year’s elevated inflation rates. Month-on-month (MoM), headline inflation is expected to show only a modest 1 basis point (bp) increase.
Expected at 7.3%, significantly lower than the 28.8% recorded in 1HFY24.Anticipated at 10.8% YoY in December 2024, with an 80bp MoM uptick. Urban core inflation was previously 8.9% in November, while rural core inflation stood at 10.9%.
Likely to remain flat YoY (+0.03%) compared to 27.5% last year, with a 23bp MoM decline. Sequential price decreases in the food category (35% CPI weight) are expected to restrict overall CPI growth.A slight 30bp MoM increase is expected, reflecting stable global oil prices and firm POL product rates.
The disinflationary trend persists despite recent monetary easing. With the central bank cutting the policy rate by 200bps this month (bringing the cumulative reduction to 900bps over six months), real interest rates (RIR) remain elevated.
Projected at ~9 percentage points, indicating continued monetary tightness despite easing. Expected at ~10% in the long run, which would bring RIR to 3 percentage points at the current policy rate.
The sharp decline in inflation strengthens the Monetary Policy Committee’s (MPC) case for further policy rate reductions in upcoming meetings. Inflation is expected to remain low for the remainder of FY25, with subdued levels likely persisting until May 2025. This trend supports ongoing economic stabilization and may facilitate further monetary easing to spur growth.
