Inflation in Pakistan Expected to Hit 9-Year Low in January 2025

Pakistan’s Consumer Price Index (CPI) for January 2025 is expected to clock in at nine years low of 2.5-3.0 percent year-on-year, according to a report by brokerage house Topline Securities.  According to the report, this will take 7MFY25 average to 6.66 percent compared to 28.73 percent in 7MFY24.  Food Inflation is expected to increase by 0.52 percent month-on-month (MoM) mainly on the 33 percent increase in chicken prices, 5 percent increase in sugar prices, and 4.6 percent increase in Pulse Moong Prices. While, prices of Eggs, Potatoes, Fresh Vegetables, and Onions is expected to come down by 15-29 percent.   Housing, water, electricity and gas segment is expected to witness approx. 1.38 percent MoM growth due to increase in rent expense by 1.5 percent, and 0.8 percent increase in electricity price as fuel price adjustment in January 2025 is lower than December 2025.  Transport segment is expected to witness increase of 0.2 percent MoM on the back of largely flattish fuel prices.    The brokerage house has maintained its average inflation forecast of 6.5-7.5 percent for FY25.  With inflation expectations of around 2.5-3.0 percent for January 2025, real rates will surge to 1000-1050bps, significantly higher than Pakistan’s historic average of 200-300bps.  Topline mentioned that IMF, in its recent report, has revised down its inflation forecast (average) for FY25 to 9.5 percent from earlier 12.7 percent reported earlier. While, central bank is also expected to revise down its earlier projection of 11.5-13.5 percent inflation for FY25 in upcoming monetary policy meeting of Jan 27, 2025.  Any major deviation in commodity prices from current levels (i.e. oil $75/barrel) may result in change in inflation estimates, it added.