Islamabad: Pakistan’s Consumer Price Index (CPI) has dropped to a four-year low of 7.5% in September 2024, marking the lowest rate since January 2021 and signaling a potential for further interest rate cuts. This decline is primarily attributed to a favorable base effect from last year’s high inflation rates, despite a slight month-on-month increase in headline inflation.

According to JS Global, the sharp decrease in CPI is part of an ongoing disinflation trend in the country, with the first quarter FY25 average CPI significantly lower at 9.4% compared to the 29.0% average in the same quarter of the previous year. This trend is supported by a notable reduction in food and energy prices. Specifically, food inflation has slowed dramatically to 0.4% year-over-year, with wheat prices dropping 38% since December 2023. Additionally, declines in global oil prices have led to reduced prices for POL products in Pakistan, contributing to a decrease in the Transport Index.

Core inflation, which excludes volatile food and energy prices, remains in double digits but has fallen to an 11.2% rate in September 2024—a 30-month low. Looking ahead, JS Global projects the FY25 average CPI to stabilize at around 8%, assuming steady oil prices and gradual PKR depreciation. This projection is based on modified expectations for fresh milk and utility price adjustments set to take effect in the coming months.