Pakistan’s inflation rate slowed to 4.9% in November 2024, marking the lowest price rise since April 2018, according to the Pakistan Bureau of Statistics (PBS). This figure is well within the central bank’s target range of 5-7%, providing some relief to consumers after a long period of high inflation.
The consumer price index (CPI) for November represents a significant decline from 7.2% in October 2024 and 29.2% in November 2023. While market expectations had forecasted a slight dip to 4.7%, the actual inflation rate came in at 4.9%. The average yearly inflation for the first five months of fiscal year 2025 stands at 7.94%, a sharp drop from the 28.62% recorded during the same period in FY24. On a monthly basis, CPI rose by 0.5% in November, compared to 1.23% in October and 2.7% in November 2023, signaling a more gradual price increase.
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Core Inflation
Despite the overall easing of inflation, core inflation remains high. Excluding volatile food and energy prices, core inflation rose by 8.9% year-on-year in November, up from 8.6% in October, but a significant improvement from 18.6% in November 2023. On a monthly basis, the core CPI increased by 1.2%, surpassing the previous month’s increase of 0.6%.
Urban vs Rural Inflation
Inflation in urban areas stood at 5.2% in November, while rural areas saw a lower inflation rate of 4.3%. This reflects the different economic pressures faced by urban and rural populations.
Rising Prices of Essentials
Despite the overall decline in inflation, prices for some essential items continued to rise. Tomatoes, eggs, lentils, moong, honey, and potatoes saw price hikes, continuing a trend from previous months. Additionally, the prices of ghee, butter, dry fruits, fish, and cooking oil have also increased, further burdening household budgets. Non-food inflation also remains a concern, with clothing prices rising by 14.37% year-on-year, and health and education costs rising by 13% and 10.55%, respectively.
Monetary and Fiscal Outlook
The policy rate is currently set at 15%, and with the CPI-based inflation rate at 4.86%, the real interest rate stands at 10.14%, a positive indicator for savers. This suggests that the central bank’s monetary tightening measures are having some success in curbing inflationary pressures.
Analysts believe that while the easing of inflation is a positive sign, addressing the challenge of high core inflation will require continued supply-side interventions and fiscal measures. These steps will be crucial in ensuring that inflation remains manageable in the future, particularly as essential goods continue to rise in price.
