ISLAMABAD, Nov 1 (Alliance News):Pakistan’s annual inflation rate increased to 7.2% in October 2024, up from 6.9% in September, but significantly lower than the 26.8% recorded in October 2023, according to data released by the Pakistan Bureau of Statistics (PBS) on Friday.
This rise in the consumer price index (CPI) continues the trend of easing inflation, which peaked at a historic high of 38% last year. The central bank is set to review the current policy rate of 17.5% in an upcoming meeting.
The inflation reading exceeded both market and government forecasts, which predicted a rate of 6.8%.
Over the first four months of the fiscal year 2025, average inflation stands at 8.7%, a significant drop from 28.5% during the same period in fiscal year 2024.
On a monthly basis, the CPI rose by 1.2% in October, reversing a 0.5% decline in September and exceeding the 1.0% increase seen in October 2023. Core inflation, which excludes food and energy, increased by 9.8% year-on-year in October, slightly lower than the 10.4% rise in September and well below last year’s 21.8%.
On a month-to-month basis, core CPI saw a 0.6% increase in October, compared to 0.3% in September and a 1.1% rise in October 2023.
The Ministry of Finance had projected inflation to be around 6-7% for October and expressed optimism that it could drop to between 5.5% and 6.5% in November 2024. Their report indicated that the declining inflation rate would support economic recovery and ongoing fiscal consolidation.
Topline Securities had anticipated a slight monthly rise, forecasting the inflation rate to fall between 6.5% and 7.0% for October, with a modest 0.9% month-to-month increase.
This would bring average inflation for the first four months of FY25 to 8.6%, a sharp decline from the previous year’s 28.5%.
Despite the recent easing, inflation remains a significant challenge for the economy, which saw rates peak at 38% in May of last year before gradually decreasing.
September’s CPI recorded a year-on-year rate of 6.9%, the lowest since January 2021, down from 9.6% in August.
Topline analysts noted that with inflation in the range of 6.5-7.0%, real interest rates in Pakistan are expected to rise to between 1,050 and 1,100 basis points above inflation, a significant increase compared to the historical average of 200-300 basis points. This situation could prompt the central bank to tighten its monetary policy.
In related news, Finance Minister Muhammad Aurangzeb informed Reuters that the International Monetary Fund (IMF) has revised its inflation forecast for Pakistan to 9.5% for the current year, aligning closely with the country’s own projections.
Aurangzeb also mentioned that the IMF lowered its import projections for Pakistan for this fiscal year to $57.2 billion.
