Pakistan’s Inflation Drops to 1.5% in February 2025, Marking Significant Decline

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Pakistan’s headline inflation reached 1.5% year-on-year in February 2025, showing a notable decrease from 2.4% in January 2025, according to data released by the Pakistan Bureau of Statistics (PBS) on Monday.

On a month-on-month basis, the Consumer Price Index (CPI) saw a decline of 0.8% in February 2025, compared to a slight increase of 0.2% in January 2025, and no change in February 2024.

Over the first eight months of the fiscal year 2025 (8MFY25), the average CPI stood at 5.85%, a drastic reduction from 27.96% in the same period of the previous fiscal year (8MFY24).

This February CPI reading is the lowest since September 2015, as reported by Arif Habib Limited (AHL).

Pakistan has faced persistent inflationary pressures in recent years. In May 2023, the CPI surged to a record high of 38%, but the rate has been steadily declining since then.

Recently, the Finance Division projected Pakistan’s headline inflation would remain within the 2-3% range for February, with a possible increase to 3-4% in March 2025.

In line with inflation trends, the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) lowered the key policy rate by 100 basis points (bps) to 12% in January 2025. This was the sixth consecutive rate cut since June 2024, when the rate stood at 22%.

SBP Governor Jameel Ahmad had stated that inflation would ease further in January before gradually rising in the following months.

The MPC is set to meet on March 10, 2025, to decide on the new policy rate.

The February CPI figure also came in lower than the projections from several brokerage firms. JS Global had anticipated inflation would drop to 2.3%, while Topline Securities predicted a year-on-year CPI of 2.0-2.5%, bringing the 8MFY25 average to 6.07% compared to 27.96% in 8MFY24.

Urban vs Rural Inflation: A Closer Look

The PBS data also revealed a decline in both urban and rural inflation.

Urban CPI inflation fell to 1.8% year-on-year in February 2025, down from 2.7% in January 2025 and 24.9% in February 2024. On a month-on-month basis, urban inflation decreased by 0.7% in February 2025 compared to an increase of 0.2% in January and February 2024.

Rural CPI inflation dropped to 1.1% year-on-year in February 2025, down from 1.9% in January and 20.5% in February 2024. Month-on-month, rural inflation decreased by 1.1% in February 2025, compared to a 0.2% increase in January and a 0.3% decline in February 2024.