Pakistan’s inflation falls to 6.5-Year low of 4.9% in November, beating forecasts
The drop in inflation is seen as a key factor behind the State Bank of Pakistan's recent decision to cut interest rates.
ISLAMABAD: Pakistan’s inflation rate slowed sharply to 4.9% year-on-year in November 2024, marking its lowest level in six and a half years, according to the latest data from the Pakistan Bureau of Statistics (PBS). This decline from 7.2% in October exceeded official expectations and indicates a significant reduction in price pressures.
On a month-on-month basis, inflation increased by 0.5% in November, a slowdown compared to the 1.2% rise in October and the 2.7% increase seen in November 2023. The average inflation rate for the first five months of the fiscal year 2025 stood at 7.88%, a sharp drop from the 28.62% recorded during the same period last year.
This marks the lowest inflation rate in the country in 78 months, or since April 2018, as noted by Topline Securities. The November data came in significantly lower than the finance ministry’s forecast of 5.8%-6.8% for the month. The government had predicted inflation to further decline to 5.6%-6.5% in December.
The drop in inflation is seen as a key factor behind the State Bank of Pakistan’s recent decision to cut interest rates. Earlier in November, the SBP lowered its benchmark rate by 250 basis points, following a trend of reducing rates since June to stimulate economic growth. The central bank has already slashed its key rate by a total of 700 basis points, bringing it down to 15%, and economists expect it to decrease further to 13.5% by the end of the fiscal year in June 2025.
Read More: SBP Slashes Policy Rate by 250 Basis Points to 15% Amid Easing Inflation
In contrast, inflation had surged to nearly 40% in May 2023, but has since cooled significantly. According to the central bank, this downward trend in inflation is expected to continue due to weaker demand and improved food supply conditions. However, the International Monetary Fund (IMF) projects that inflation will average 9.5% for 2024.
PM Shehbaz Optimistic About Further Policy Rate Cuts After Inflation Drops to 4.9%
Prime Minister Shehbaz Sharif has welcomed the significant decline in Pakistan’s inflation, which dropped to 4.9% in November 2024, the lowest in six and a half years. Addressing the federal cabinet, he expressed hope that this development would lead to further cuts in the key policy rate by the State Bank of Pakistan (SBP).
The inflation rate fell from 7.2% in October, surpassing official forecasts, marking a notable relief for the public. PM Sharif emphasized that lower inflation would ease the financial burden on ordinary citizens and reduce hardships, recalling a time under former Prime Minister Nawaz Sharif when inflation stood at 3.5%.
The Prime Minister is optimistic that the SBP’s upcoming meeting of the Monetary Policy Committee (MPC) will result in further rate cuts to support economic growth.
