Islamabad, Apr 22, 2025: Pakistan’s Consumer Price Index (CPI) is projected to further decrease in April 2025, dipping to just 0.3% year-on-year, the lowest level seen in six decades.
This decline follows a reading of 0.7% year-on-year in March 2025, underscoring the country’s ongoing disinflationary trend.
JS Global reports that the slowdown in inflation is largely due to decreasing food prices and a favorable base effect, caused by the elevated inflation levels recorded during the same period last year.
As a result, the average inflation rate for the first ten months of fiscal year 2024–25 (10MFY25) is expected to be 4.9%, a sharp drop from 26.2% in the same period of the previous fiscal year.
Food Inflation Decline: Key Factors at Play
Food inflation, which accounts for 35% of the CPI basket, is expected to fall by 5.7% year-on-year in April 2025, a significant decrease compared to 9.7% in April 2024.
This reduction is primarily driven by the sharp decline in the prices of essential food items like rice, potatoes, tomatoes, wheat, and onions.
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Core Inflation Trends: A Slight Increase
On the other hand, core inflation, which excludes volatile food and energy prices, is projected to rise by about 7.7% year-on-year in April 2025, with a month-on-month increase of 0.4%.
Core inflation has consistently hovered around 10% in recent months, especially in urban centers, indicating a more persistent inflationary pressure in non-food sectors.
Monetary Policy and Interest Rate Expectations
In light of these inflationary shifts, the expectation for further interest rate cuts is growing.
The State Bank of Pakistan (SBP) maintained its policy rate at 12% during its most recent Monetary Policy Committee (MPC) meeting, signaling a pause in its previous cycle of rate reductions despite the notable drop in inflation.
Over the six MPC meetings between June 2024 and January 2025, the SBP implemented a total rate cut of 1,000 basis points, lowering the policy rate from a peak of 22%.
The projected average CPI for the fiscal year FY2024–25 is now estimated at 5.0%, contingent on stable global oil prices and the exchange rate between the Pakistani Rupee and the US Dollar.
While the increase in the petroleum development levy (PDL) has been factored into the projections, there remains a risk of second-round inflationary effects that could alter the outlook.
With the next MPC meetings scheduled for 5th May 2025 and 16th June 2025, all eyes will be on the SBP’s decision on whether further interest rate cuts are warranted in response to the persistent decrease in inflation.
