Islamabad-Pakistan has recorded its lowest inflation rate in four years, marking a significant decline in the country’s economic landscape. According to recent data, the inflation rate has dropped to its lowest level since 2020.
Pakistan’s headline inflation has dropped to 6.9% year-on-year in September 2024, the lowest since January 2021, according to the Pakistan Bureau of Statistics. This decrease from 9.6% in August is a significant achievement, with experts attributing it to a high base effect, decreasing global commodity and energy prices, and a stable exchange rate,
The month-on-month Consumer Price Index (CPI) also fell by 0.5% in September, a reversal from the 0.4% rise in August and 2.0% increase in September 2023. This decline is expected to continue, with the Ministry of Finance predicting inflation to stay within the 8-9% range for September and October,
The latest figure is also lower than the government’s expectations. The finance ministry had projected inflation to slow further in the coming months (September-October) to around 8-9%, as stated in its monthly economic outlook released on Friday.
The Ministry of Finance indicated, “Inflation is expected to stay within the 8% to 9% range for September and October 2024” in its ‘Monthly Economic Update and Outlook.
This decline in inflation could pave the way for additional cuts in the key policy rate.
In September, the SBP implemented its most significant reduction in the key policy rate since April 2020, cutting it by 200 basis points to 17.5% in response to falling inflation and decreasing international oil prices.
Shahid Ali Habib, CEO of Arif Habib Limited, commented, “With continued disinflation expected, driven primarily by the high base effect and lower global commodity prices, the SBP has room to further reduce the policy rate, as real interest rates are nearly 1090 basis points positive.”
Inflation has been a major and persistent economic challenge for Pakistan, particularly in recent years. In May of last year, the CPI inflation rate reached a record high of 38%, but it has been on a downward trend since then.
Additionally, the latest inflation reading was lower than projections made by several brokerage firms.
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