Islamabad: Pakistan’s inflationary trend is likely to decline further as the CPI-based figure is expected to fall below 5% in November, hitting a 78-month low, according to a Topline Securities report.
The report said: “Pakistan CPI for November 2024 is expected to reach 4.5-5% y/y (+0.4% m/m), bringing the 5-year average of FY25 to 7.91% compared to 28.62% in Fiscal year 5 years 2024.
It is worth noting that inflation in Pakistan has been a major and persistent economic challenge, especially in recent years. In May last year, CPI inflation reached a record high of 38%. However, it has been on a downward trajectory ever since.
Pakistan’s inflation rate stood at 7.2 percent year-on-year in October 2024, slightly higher than the reading in September 2024 when it stood at 6.9 percent, Pakistan Bureau of Statistics data reported.
Topline Securities noted that with inflation expectations around 4.5-5.0% for November 2024, “real interest rates will rise to 1,000-1,050 basis points, much higher than Pakistan’s historical average of 200-300 basis points.”
He pointed out that higher real interest rates would provide scope for further reduction in interest rates.
The State Bank of Pakistan (SBP) in its latest Monetary Policy Committee meeting cut its key interest rate by 250 basis points, raising it from 17.5% to 15% after the fourth consecutive round of monetary easing that began in June 2024.
“We expect interest rates to reach 11-12% by December 2025, suggesting positive real rates of 200-300 basis points based on FY26E average inflation of 8.8%,” Topline Securities said.
The brokerage house expected the inflation rate to reach 7-8% in FY25.
He also revealed that the State Bank of Scotland had indicated in its latest monetary policy communication that “average inflation for FY25 will fall below the previous forecast range of 11.5-13.5%”.