National headline inflation for August threw no surprise clocking in at 9.64 percent year-on-year – lowest since October 2021. This is also the first incidence of single-digit year-on-year headline national inflation since October 2021. A 33-month low as high base from last year remains in play. On a month-on-month basis, normal services seem to have resumed as both urban and rural inflation registered third straight month of increase. The magnitude of increase is visibly smaller from the horrors of a year or two ago, as a multitude of factors from high base to relative calm in international commodity prices and administered energy subsidies have come to the rescue.

The heavyweight non-perishable food sub index now reads a negative reading year-on-year – which is a rarity even in moderate inflationary scenarios in Pakistan. Wheat flour, rice, cooking oil, ghee and sugar – all heavily used kitchen items – are priced lower than a year ago at retail level. They all come at the back of record high prices, but a combination of favorable crop output, calm in the international market, a remarkably stable PKR, and government interventions have all played their part in keeping prices in check.

Perishable food prices, on the other hand, have risen appreciably in both urban and rural settings, on both year-on-year and month-on-month metrices. Most of it is largely cyclical but, in some cases, the magnitude of increase has surpassed historical averages. Fresh milk and related products, for some reason, are categorized under non-perishable food items in the CPI basket. The magnitude of change in fresh milk is much curtailed at 9.8 percent year-on-year in rural settings, lowest in 31 months– where it has the single largest basket weight at 10 percent. The same for urban settings is also close to 10 percent. Some observers find the reported change in milk prices after budgetary measures came into effect, a bit on the counterintuitive side.

Talking of counterintuitive, last month’s quarterly revision of house rent index that shows a 0.97 percent increase over previous quarter at a seven-month low, still remains unanswered.

Electricity tariffs are where the worst fears at the turn of the fiscal year have not materialized. Last month, it was the Prime Minister’s relief package that limited the impact of base tariff revision, and for August, it was the Chief Minister of the biggest province who came up with another relief to the tune of Rs45 billion. Monthly fuel charges adjustment also remained lower month-on-month, but a 6.4 percent change month-on-month is well and truly reflective of the Rs14/unit subsidy at effective tariffs for Punjab domestic consumers in the 201–500-unit consumption slabs. This virtually insulates over 90 percent of all domestic consumption from the base tariff increase. That said, subsidies are slated to end in September, and thereafter, a sizeable increase in CPI electricity reading should be reflected.

The government has so far refrained from jacking up taxes on petroleum products, despite the IMF breathing down the neck – that has helped keep the transport index largely in check. With nearly a quarter of forgone Petroleum Levy revenues, and the FBR tax target been missed by over Rs100 billion in just two months – something has to give, and soon. It is highly likely the IMF program will come up with more stringent structural benchmarks and performance criteria – of which taxation measures will likely be the priority.

For now, it seems that after all those years and shifting of goalposts, the much-cited medium-term inflation target of 5-7 percent may well be achieved by 1QFY26. That said, there is many a slip between the cup and the lip – as 12 months is a long enough period for things to go awry.