By Staff Reporter
KARACHI: Pakistan’s consumer price index (CPI) is expected to drop to a nine-year low in January, with inflation forecast to range between 2.5 percent and 3.0 percent year-over-year, a research report by brokerage Topline Securities showed.
Food inflation is expected to rise 0.52 percent month-over-month in January, driven by a 33 percent increase in chicken prices, a 5 percent rise in sugar prices and a 4.6 percent increase in pulse moong prices. However, prices of eggs, potatoes, fresh vegetables and onions are expected to fall 15-29 percent.
The housing, water, electricity and gas segment is expected to see a 1.38 percent month-over-month increase due to higher rent expenses and electricity prices.
The fuel price adjustment in January 2025 is lower than December 2024, at Rs0.76 versus Rs1.14. The transport segment is forecast to rise by 0.2 percent month-over-month, driven by relatively stable fuel prices.
For the full fiscal year 2025, Topline Research maintains its average inflation forecast at 6.5-7.5 percent. The International Monetary Fund (IMF) has revised down its inflation forecast for fiscal 2025 to 9.5 percent from 12.7 percent previously.
The report said the central bank is poised to deliver its sixth consecutive interest-rate cut this month, a move that would extend the most aggressive easing cycle among major emerging markets.
A survey by Topline Securities showed 61 percent of respondents expect the State Bank of Pakistan to lower its benchmark rate by 100 basis points to 12 percent at its Jan. 27 meeting.
The anticipated cut would follow a 200 basis-point reduction to 13 percent in December, which was the fifth straight decrease since June. The central bank has lowered borrowing costs by 900 basis points over the past year to support an economy struggling to gain momentum.
The real interest rate in January 2025 is forecast to surge to 1000-1050 basis points, significantly higher than Pakistan’s historic average of 200-300 basis points.
“Participants are expecting a rate cut due to high real rates of 950bps in Jan. 2025, compared to historic average of 200-300bps,” the brokerage house said. “We expect the central bank to cut the policy rate by 100 basis points to 12 percent in the upcoming monetary policy meeting on January 27, 2025.”
The Monetary Policy Committee has said its approach of measured rate cuts has been effective in keeping inflation and external account pressures under control while supporting economic growth.
The central bank expects inflation to average “substantially below” its earlier forecast range of 11.5 percent to 13.5 percent in 2025. A separate survey showed 56 percent of respondents expect inflation to remain below 8 percent in the fiscal year through June.
Pakistan’s economy has been supported by a $7 billion International Monetary Fund loan facility agreed in September. The central bank has cautioned that meeting the country’s annual revenue target will require “considerable efforts and additional measures.”
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