Islamabad: Pakistan's Consumer Price Index (CPI) has fallen to its lowest level in nearly three years this July, recording a 33-month low at 11.1%, as reported by recent statistics. This significant drop is largely attributed to a strong base effect, which counters the general upward trend in inflation rates.
According to JS Global, despite a monthly uptick in inflation of 2.1% largely driven by food prices, the annual CPI continued to decline. The decrease was notably impacted by the food inflation rate, which only rose by 1.6% year-over-year, the lowest in almost five and a half years. This reduction in the pace comes after food prices experienced hyperinflation last year, with monthly increases averaging 312 basis points and a year-over-year rise of 38% in the fiscal year 2023.
Looking ahead, JS Global forecasts the monthly inflation rate for FY25 to average 110 basis points per month. Expected increases in utility charges and food prices are set to influence this forecast. Notably, a significant surge in milk prices is anticipated, with branded milk prices increasing the price gap with unbranded milk from the usual 20% to about 40%. The agency also projects an overall average CPI of 10% for FY25, with a peak at 14% around mid-2025, followed by a normalization to below 11% towards the end of the fiscal year.
Despite these fluctuations, real interest rates are expected to remain significantly positive, with projections placing them around 923 basis points above the current policy rate of 19.5% for FY25. This is anticipated to provide a cushion against the inflationary pressures expected in the coming months.