Pakistan’s Consumer Price Index (CPI) is projected to fall further to just 0.3 percent year-on-year in April 2025, marking the lowest inflation level in six decades and continuing the country’s sharp disinflation trend. This follows a 0.7 percent year-on-year reading recorded in March 2025, according to analysis by JS Global.
The moderation in inflation is largely driven by declining food prices and a favorable base effect, as headline inflation was significantly higher during the same period last year. Food inflation, which accounts for 35 percent of the CPI basket, is expected to drop by 5.7 percent year-on-year in April 2025, compared to 9.7 percent in April 2024. Key staples such as rice, potatoes, tomatoes, wheat, and onions have seen considerable price reductions.
For the first ten months of the fiscal year 2024–25 (10MFY25), average inflation is estimated at 4.9 percent, a sharp decline from 26.2 percent during the same period last year. Meanwhile, core inflation—which excludes volatile food and energy prices—is anticipated to rise by around 7.7 percent year-on-year in April 2025, with a month-on-month increase of 40 basis points. Core inflation has remained near 10 percent for several months, particularly in urban areas.
Monetary Policy and Rate Cut Expectations
The disinflation trend has strengthened hopes for further interest rate cuts. The State Bank of Pakistan (SBP) kept its policy rate steady at 12 percent during its last Monetary Policy Committee (MPC) meeting, pausing the easing cycle despite the sharp drop in inflation. Since June 2024, the SBP has cut rates cumulatively by 1,000 basis points from a peak of 22 percent.
The projected average CPI for the full fiscal year 2024–25 stands at 5.0 percent, assuming stable global oil prices and a steady exchange rate between the Pakistani Rupee and the US Dollar. While the recent increase in the petroleum development levy (PDL) has been incorporated into forecasts, any secondary inflationary effects remain a risk.
The SBP’s upcoming MPC meetings are scheduled for May 5 and June 16, 2025, with markets closely watching for potential policy rate adjustments in response to the sustained decline in inflation.
