Pakistan’s headline inflation clocks in at 11.1% in July 2024, lowest since November 2021

Pakistan’s headline inflation clocked in at 11.1% on a year-on-year basis in July 2024, lower than the reading in June 2024 when it stood at 12.6%.

This is the lowest CPI figure since November 2021 when it stood at 11.5%, shows data available with the Pakistan Bureau of Statistics (PBS).

On a month-on-month basis , CPI inflation increased 2.1% in July 2024 as compared to rise of 0.5% last month.

The reading is also lower than official expectations. The finance ministry had stated that it expects inflation in July to range between 12% and 13% in the monthly economic outlook released on Tuesday.

The inflation figure comes after the State Bank of Pakistan (SBP) cut the key policy rate by 100 basis points, taking it to 19.5%, arguing that there are “risks to the inflation outlook from fiscal slippages and ad-hoc decisions related to energy price adjustments”.

However, the reading was slightly higher when compared with projections made by a number of brokerage houses.

Foundation Securities expected CPI to clock in “at 10.5% YoY in July”.

“Inflation is projected to decline significantly in FY25 amid cooling food and core inflation. (1) Lagged impact of monetary tightening of past 2 years, (2) favorable base effect, (3) improved domestic crop outlook, (4) anticipated favorable global and domestic conditions, and (5) steady exchange rate are expected to contribute in achieving price stability,” it had said.

JS Global, another brokerage house, also projected inflation rate to clock in at 10.5% in July.

“With July 2024 CPI now further expected to cool down to 10.5%, despite a MoM uptick of 1.6%, Pakistan’s real interest rate (RIR) remains at sky-high levels, further expanding to 10 percentage points,” said JS Global in a report.

However, analysts also believe that a high-base effect coupled with the latest decrease in petroleum prices would help cool off inflation that hit a record high of 38% in May 2023.

Urban, rural inflation

The PBS said CPI inflation urban clocked in at 13.2% on year-on-year basis in July 2024, as compared to an increase of 14.9% in the previous month and 26.3% in July 2023.

On month-on-month basis, it increased to 2.0% in July 2024 as compared to an increase of 0.6% in the previous month and an increase of 3.6% in July 2023.

CPI inflation rural increased to 8.1% on year-on-year basis in July 2024 as compared to an increase of 9.3% in the previous month and 31.3% in July 2023.

On month-on-month basis, it increased to 2.2% in July 2024 as compared to an increase of 0.3% in the previous month and an increase of 3.3% in July 2023.