
Recent reports suggest that Pakistan’s inflation will fall below 3% in January 2025. This significant drop is attributed to various factors, including a high base effect from the previous year. Moreover, the stability of the Pakistani Rupee against the US Dollar, and subdued prices in the food and energy sectors.
Pakistan’s inflation rate is projected to reach its lowest level in over nine years. It is significantly offering some relief to consumers and businesses. Market analysts predict the Consumer Price Index (CPI)-based inflation could drop below 3% in January 2025, continuing a steady decline.
JS Global, a prominent brokerage firm, forecasts inflation at 2.8% for January, marking the lowest rate since November 2015. This significant drop is attributed to a high base effect, despite a slight month-on-month increase of 0.6%. Similarly, Ismail Iqbal Securities projects inflation at 2.9% for January, compared to a staggering 28.3% in January 2024.
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The decline has been steady, with December 2024 inflation at 4.1% year-on-year, down from 4.9% in November, according to the Pakistan Bureau of Statistics (PBS). Average inflation for the first seven months of FY25 is expected to stand at 6.7%, a remarkable improvement from 28.7% during the same period last fiscal year.
SBP Stats
The consistent drop in inflation has raised hopes for further cuts in the central bank’s policy rate. JS Global anticipates a 100 basis point (bps) reduction in the upcoming Monetary Policy Committee (MPC) meeting. Meanwhile, Ismail Iqbal Securities also expects a similar cut but warns of a more cautious approach in subsequent meetings.

The State Bank of Pakistan (SBP) has already reduced the policy rate by 900 bps since June 2024, with the most recent cut bringing it to 13%. Experts note that while the declining inflation provides short-term relief, challenges may arise later this year. As the high base effect diminishes starting in May 2025, inflationary pressures could return, potentially pushing rates upward.
For now, the easing inflationary trend is a positive development for Pakistan’s economy. However, policymakers are expected to closely monitor these trends to balance growth and price stability in the months ahead.