The inflationary trend in Pakistan is expected to slow down further in September, reaching a nearly four-year low, according to a report by JS Global. The Consumer Price Index (CPI) for September 2024 is projected to be around 7.5%, marking the lowest rate since January 2021. Despite a slight month-on-month increase, the report attributes this deceleration to the favorable base effect from the previous year’s high prices. This means that the average Pakistani’s purchasing power is expected to increase, as the cost of goods and services is projected to rise at a slower rate.
In recent years, inflation has posed a significant and persistent economic challenge for Pakistan. However, the CPI inflation rate has been on a downward trajectory since reaching a record high of 38% in May of last year. In August 2024, the year-on-year CPI reading was 9.6%, showing a decrease from the 11.1% reading in July 2024, according to data released by the Pakistan Bureau of Statistics.
JS Global’s report also projects that CPI inflation may reach a low of 6% by March 2025, with a potential rebound to 12% by June 2025 before normalizing to approximately 10.5%. These projections are attributed to steady oil prices and gradual depreciation of the Pakistani Rupee (PKR).
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The declining inflation trend supports the expectation of a further reduction in interest rates at the upcoming meeting of the Monetary Policy Committee in November, according to the brokerage house. JS Global anticipates a fourth consecutive interest rate cut of 150 basis points in November 2024, bringing the policy rate down to 16%. This follows the State Bank of Pakistan’s (SBP) recent 200-basis-point cut, which brought the policy rate down to 17.5% amid slowing inflation and declining international oil prices. The role of the Monetary Policy Committee in managing the economy is crucial, and its actions are expected to reassure the market.
