Pakistan’s headline inflation fell to 1.5% year-on-year in February 2025, down from 2.4% in January 2025, according to data released by the Pakistan Bureau of Statistics (PBS) on Monday. This marks a significant decline, with inflation now at its lowest level in 113 months according to Topline Securities.
On a month-on-month basis, the Consumer Price Index (CPI) decreased by 0.8% in February, compared to a 0.2% increase in January and no change in February 2024. The average CPI inflation for the first eight months of FY2025 (8MFY25) stood at 5.85%, a sharp drop from 27.96% recorded during the same period in FY2024.
Inflation in Pakistan has been a persistent economic challenge, with the CPI hitting a record high of 38% in May 2023. However, inflation has been on a steady downward trajectory since then.
The Finance Division recently projected headline inflation to remain within the 2-3% range in February, with a potential increase to 3-4% by March. The latest CPI reading of 1.5% was even lower than projections made by brokerage houses.
Urban and Rural Inflation
The PBS data revealed that urban inflation decreased to 1.8% year-on-year in February 2025, down from 2.7% in January and 24.9% in February 2024. On a month-on-month basis, urban inflation fell by 0.7% in February, compared to a 0.2% increase in January and February 2024.
Rural inflation also saw a decline, dropping to 1.1% year-on-year in February 2025, compared to 1.9% in January and 20.5% in February 2024. Month-on-month, rural inflation decreased by 1.1% in February, following a 0.2% increase in January and a 0.3% decrease in February 2024.
Monetary Policy and Interest Rates
In January 2025, the State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC) reduced the key policy rate by 100 basis points, bringing it down to 12%. This marked the sixth consecutive rate cut since June 2024, when the policy rate stood at 22%.
SBP Governor Jameel Ahmad had stated that inflation would ease further in January before rising slightly in the following months. The MPC is scheduled to meet on March 10 to decide on the new policy rate.
