Islamabad, Nov 19: Pakistan’s Consumer Price Index (CPI) for November 2024 is projected to range between 4.5% and 5.0% year-on-year (YoY), with a monthly increase of 0.4%. This brings the 5-month FY25 average inflation to 7.91%, a significant drop from 28.62% recorded during the same period in FY24.
Food and Energy Contributions
Food inflation for November is expected to rise by 0.2% month-on-month (MoM), driven by higher prices of eggs, Pulse Moong, tomatoes, and potatoes, with increases ranging from 5% to 35%. The housing, water, electricity, and gas segment is predicted to grow by approximately 0.11% MoM due to a 7% increase in LPG prices. However, electricity costs are expected to decline due to a negative fuel cost adjustment. In the transport sector, petrol and diesel price hikes are expected to push prices up by 1.4% MoM.
Real Rates and Inflation
Real rates are set to surge to 1,000–1,050 basis points (bps) for November, significantly above Pakistan’s historical average of 200–300 bps, reflecting the impact of lower inflation expectations.
Interest Rate Projections
The report anticipates the policy rate to settle at 11%–12% by December 2025, aligning with positive real rates of 200–300 bps, given FY26’s projected inflation average of 8.8%. For FY25, inflation is expected to average between 7% and 8%.
Revised IMF and Central Bank Forecasts
The IMF has revised its FY25 average inflation forecast to 9.5%, down from its earlier projection of 12.7%. Similarly, Pakistan’s central bank expects average FY25 inflation to fall below the previously estimated range of 11.5%–13.5%.
Key Risks
Inflation estimates remain vulnerable to fluctuations in global commodity prices, particularly crude oil, currently benchmarked at $75 per barrel. Any major deviations could alter these projections.
