Islamabad, December 2, 2024- Pakistan’s inflation rate dropped to 4.9% year-on-year in November 2024, its lowest in six and a half years, according to data released by the Pakistan Bureau of Statistics (PBS) on Monday. This figure beats the official forecast and represents a significant decline from 7.2% recorded in October.
On a month-on-month basis, inflation, as measured by the Consumer Price Index (CPI), rose by 0.5% in November, down from 1.2% in October and 2.7% in November 2023.
For the first five months of FY2025, average headline inflation stood at 7.88%, a steep decline compared to 28.62% during the same period of FY2024. A report from Topline Securities highlights that November’s reading is the lowest in 78 months, dating back to April 2018.
This cooling trend also surpassed official forecasts. The Finance Ministry’s November economic report had predicted inflation would ease to between 5.8% and 6.8% in November, with further moderation to 5.6%-6.5% in December.
“The inflation rate is expected to further decline to 5.6%-6.5% by December 2024,” stated the Finance Division in its Monthly Economic Update and Outlook.
The State Bank of Pakistan (SBP) responded to this trend by reducing interest rates by 250 basis points earlier in November to stimulate the economy. Since June, the SBP has slashed its policy rate by 700 basis points, bringing it to 15% last month. According to a Bloomberg survey, economists anticipate the benchmark rate will decline further to 13.5% by the end of FY2025 in June.
Inflation had reached a multi-decade high of nearly 40% in May 2023 before dropping sharply to 7.2% in October and slightly higher than 6.9% in September 2024. The SBP has attributed this slowdown to subdued demand and improved food supply.
However, the International Monetary Fund (IMF) projects consumer price increases to average 9.5% for 2024. The coming months will determine whether the current cooling trend persists or adjusts to global and domestic economic pressures.
