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Pakistan Inflation Slows, Rate Cut Justified
1 Jan
Summary
- December inflation rose 5.6%, below expert predictions.
- Central bank lowered its policy rate to a three-year low.
- Food costs slowed significantly, while housing/energy rose.
Pakistan's inflation rate moderated in December, with the consumer price index rising by 5.6% annually, a figure lower than the 5.8% median estimate. This deceleration from November's 6.1% reading provided further support for the State Bank of Pakistan's recent monetary policy adjustments.
In response to stable price pressures and the need to foster economic expansion, the central bank reduced its key policy rate by 50 basis points on December 15. This move brought the rate to its lowest point in nearly three years, following a period of holding steady across four prior policy meetings.
While food inflation slowed considerably to 3.24% in December compared to the previous month, the costs for housing and energy saw an uptick, climbing to 6.86%. Analysts anticipate inflation to average 6.3% in fiscal year 2026, but acknowledge risks from fiscal issues and global energy shocks.
