By Staff Reporter
KARACHI: Pakistan’s consumer prices rose 9.2% in July from a year earlier, a slowdown from June’s pace that nonetheless left policymakers wary that higher energy costs could reignite inflationary pressures across South Asia’s second-largest economy.
The consumer price index eased from 11.1% in June, according to data released by the Pakistan Bureau of Statistics on Monday, marking a return to single digits after three months in double-digit territory. The reading was slightly slower than the 9.3% median estimate in a Bloomberg survey of economists, though it remained more than double the 4.1% pace recorded in July 2025.
On a month-on-month basis, consumer prices climbed 1.2%, reversing a 0.3% decline in June and comparing with a 2.9% increase in the same month last year.
The moderation in headline inflation masks a divergence in underlying price pressures. Food inflation accelerated to 10.64% in July from 9.4% in June, even as housing and energy costs eased 7.14% from a year earlier. Muhammad Awais Ashraf, research director at AKD Securities, said the return to single digits stemmed from lower fuel prices offsetting a sharp increase in food costs, and predicted further moderation as perishable food prices normalise.
Urban inflation stood at 8.7% year-on-year, down from 11.2% in June, while rural inflation ran hotter at 9.9%, moderating from 10.9% the previous month. Both measures rose 1.2% on a monthly basis.
The data lends support to the State Bank of Pakistan’s decision last month to hold its benchmark interest rate at 11.5%, a level the Monetary Policy Committee has maintained since its first meeting of the 2026-27 fiscal year. Even as the reading validates that stance, central bank officials have signalled they are far from declaring victory over inflation.
Disruptions to shipping through the Strait of Hormuz, a critical corridor for Pakistan’s oil and gas imports, forced the country to purchase its most expensive spot cargo since 2022, underscoring the vulnerability of import-dependent inflation to geopolitical shocks. The central bank warned in last week’s monetary policy statement that its outlook remains exposed to risks including volatility in global energy prices, even as it expects inflation to ease gradually and stabilise near the upper end of its 5%-7% target range by June 2027.
SBP Governor Jameel Ahmad struck a similar note in a press briefing ahead of the data release. “We expect the CPI to clock in at the upper band of our target range of 5-7% by the end of this fiscal year,” Ahmad said.
The Finance Division, in its latest monthly outlook, had projected July CPI in the 9-10% range, flagging rising global oil prices as a threat to the disinflation trend. The ministry’s caution came against a backdrop of broader economic strain: foreign direct investment plunged 33.9% in the last fiscal year, sliding to $1.64 billion from $2.48 billion in 2024-25.
Ahead of Monday’s release, brokerages had largely anticipated the single-digit reading, while cautioning that favorable base effects rather than a genuine easing in price momentum were driving the improvement. Ismail Iqbal Securities had projected headline inflation at 9.3% year-on-year, describing the shift as “largely base-driven rather than a genuine easing in momentum.” JS Global’s estimate stood at 9.1%.
Food and non-alcoholic beverages remained the largest contributor to annual inflation, rising 10.6% from a year earlier, the bureau said. Transport costs jumped 15.1% year-on-year, while communication prices climbed 13.6%. Housing, water, electricity, gas and fuel costs rose 7.1%.
The price swings within the food basket were stark. Urban tomato prices surged 174.7% from a year earlier, while wheat climbed 77.7%, onions rose 75.9% and wheat flour gained 67.6%. Sugar prices moved in the opposite direction, falling 21.0% year-on-year, while potato prices dropped 34.4%.
The Sensitive Price Indicator, which tracks costs for essential goods consumed by lower-income households, rose 12.0% year-on-year in July. The Wholesale Price Index climbed 9.4% over the same period.
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