State Bank of Pakistan predicts inflation rate decrease

Pakistan's headline inflation rate saw a significant decrease to 11.8% year-on-year in May 2024, down from the previous month's 17.3%. This decline was primarily attributed to tighter monetary and fiscal policies, robust agricultural production, and a stable currency.

Analysts are predicting a potential interest rate cut by the State Bank of Pakistan in response to the current high real rates. The average inflation for July-May was recorded at 24.52%, lower than the previous year's 29.16%, indicating a positive trend.

The Ministry of Finance has projected inflation to range between 13.5-14.5% in May 2024, with expectations of further deceleration in the coming months. Various brokerage houses also foresee lower inflation figures for May, citing factors such as a high base effect from the previous year and consecutive monthly declines.

Urban CPI inflation rose to 14.3% year-on-year in May 2024, while rural CPI inflation stood at 8.2% during the same period. The State Bank of Pakistan's Monetary Policy Committee has maintained the key policy rate at 22% to ensure macroeconomic stability and aims to bring inflation down to the target range of 5-7% by September 2025.

The Committee acknowledges the risks posed by global oil price volatility, commodity price fluctuations, energy sector debt resolution, and fiscal consolidation measures on future inflation levels.

The recent decline in Pakistan's inflation rate reflects positive economic developments driven by prudent policies and favorable agricultural conditions. With expectations of further moderation in inflation, coupled with efforts to maintain macroeconomic stability, the country is poised for a more stable economic outlook in the coming months.