Market experts are forecasting a continued decline in inflation in Pakistan, with projections indicating that the Consumer Price Index (CPI)-based inflation could fall below 3% in January 2025. According to analysts, the ongoing trend of sharp disinflation is expected to persist, bringing inflation down to 2.8%, the lowest level since November 2015. This decrease is largely attributed to a high base effect, despite a slight month-on-month increase of 0.6%.

JS Global, in its latest report, suggested that this decline would push the average inflation for the first seven months of the fiscal year 2025 (7MFY25) to 6.7%, a significant drop from 28.7% in the same period last year (7MFY24). Similarly, Ismail Iqbal Securities Limited also projected that inflation for January 2025 would be 2.9%, marking a sharp decline from 28.3% in January 2024. This reduction reflects easing price pressures across the economy.

In December 2024, Pakistan’s inflation rate stood at 4.1% on a year-on-year basis, down from 4.9% in November, according to data from the Pakistan Bureau of Statistics (PBS). This consistent decline in inflation is providing momentum for the central bank to potentially reduce its key policy rate further.

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Both JS Global and Ismail Iqbal Securities expect the State Bank of Pakistan’s Monetary Policy Committee (MPC) to announce another rate cut in the upcoming policy meeting. JS Global anticipates a smaller reduction of 100 basis points (bps), following the previous rate cuts. The brokerage firms noted that while inflation is on a downward trajectory, there is a possibility that inflationary pressures could resurface in May 2025, as the base effect wanes.

In the past months, the MPC of the SBP had already reduced the policy rate by 900 bps cumulatively since June, with a 200 bps cut to 13% in the most recent monetary policy decision. These measures are part of the broader effort to manage inflation and stimulate economic growth.