Pakistan’s headline inflation clocked in at 6.9% on a year-on-year basis in September 2024, lower than the reading in August 2024 when it stood at 9.6%, showed Pakistan Bureau of Statistics (PBS) data on Tuesday.

The CPI reading is the lowest since January 2021, according to the PBS.

“Due to aggressive monetary tightening, the State Bank of Pakistan (SBP) has achieved bringing inflation below the one-year target of 7% ahead of time,” said Mohammed Sohail, CEO Topline Securities, in a note.

On a month-on-month basis, CPI decreased by 0.5% in September 2024 as compared to an increase of 0.4% in the previous month and an increase of 2.0% in September 2023.

Experts attributed the slowing inflation trend to several key factors, including a high base effect, declining global commodity and energy prices, and a stable exchange rate.

The reading is also lower than official expectations. The finance ministry had stated that it expects inflation to decelerate further in the next two months (September-October), and hover around 8-9%, in the monthly economic outlook released on Friday.

“Inflation is expected to remain within the range of 8% to 9% in September and October 2024,” the Ministry of Finance said in its ‘Monthly Economic Update and Outlook’.

The slowing inflation figure also gives impetus to a further cut in the key policy rate.

In September, the SBP in its last Monetary Policy Committee (MPC) unleashed its most aggressive cut in the key policy rate since April 2020, reducing it by 200bps to bring it down to 17.5% amid slowing inflation and declining international oil prices.

“With continued disinflation expected, mainly on the back of high base effect, falling global commodities, this gives SBP room to keep lowering the policy rate, as real interest rates are nearly 1090bps positive,” said Shahid Ali Habib, CEO Arif Habib Limited, in a note.

Inflation in Pakistan has been a significant and persistent economic challenge, particularly in recent years. In May of last year, the CPI inflation rate hit a record high of 38%. However, it has been on a downward trajectory since then.

Meanwhile, the latest reading was also lower than projections made by a number of brokerage houses.

JS Global expected inflation reading to clock in at 7.5%.

“Progressing through the ‘year of disinflation’ on favourable base effect from last year’s elevated prices, Pakistan’s Sep-2024 CPI is expected to clock in close to 7.5% - lowest in almost 4 years (since Jan-2021), despite a slight MoM uptick,” said the brokerage house.

Urban, rural inflation

The PBS said CPI inflation urban clocked in at 9.3% on year-on-year basis in September 2024 as compared to 11.7% in the previous month and 29.7% in September 2023.

On month-on-month basis, it decreased by 0.5% in September 2024 as compared to an increase of 0.3% in the previous month and an increase of 1.7% in September 2023.

CPI inflation rural decreased to 3.6% on year-on-year basis in September 2024 as compared to 6.7% in the previous month and 33.9% in September 2023.

On month-on-month basis, it decreased by 0.5% in September 2024 as compared to an increase of 0.6% in the previous month and an increase of 2.5% in September 2023