Islamabad: Pakistan’s Consumer Price Index (CPI) is anticipated to fall to a 33-month low of 10.5% in July 2024, despite a 1.6% increase from the previous month. This decrease is largely attributed to a significant base effect from last year’s high inflation rates, alongside expected reductions in food inflation.

According to JS Global, the CPI decrease is occurring in spite of month-over-month increases in the costs of food, transport, and housing. Food inflation, notably, is projected to hit a nine-year low of -0.5% year-over-year, a sharp contrast to the hyperinflation seen in the fiscal year 2023, where monthly and yearly increases were exceptionally high.

Despite the near-term easing, the outlook for fiscal year 2025 suggests rising utility charges and ongoing inflationary pressures. The forecast anticipates an average monthly CPI increase of 105 basis points, with notable spikes expected in August and later in the fiscal year due to adjustments in utility tariffs and other factors.

The implications for monetary policy are significant, with real interest rates expected to remain robust. The State Bank of Pakistan is predicted to cut the policy rate by up to 150 basis points in the upcoming monetary policy statement, reflecting the eased inflation outlook and continuing the trend of monetary easing.