By Staff Reporter
ISLAMABAD: The consumer price inflation slowed to 6.9 percent in September from 9.6 percent in August, its lowest level since January 2021, as easing food and fuel rates helped tame price pressures, official data showed on Tuesday.
The Consumer Price Index (CPI) fell 0.5 percent month-on-month in September, reversing August’s 0.4 percent gain and September 2023’s 2.0 percent surge, the Pakistan Bureau of Statistics data showed.
Urban CPI inflation eased to 9.3 percent year-on-year in September from 11.7 percent in August and 29.7 percent in September 2023. Month-on-month, urban CPI fell 0.5 percent versus August’s 0.3 percent gain and September 2023’s 1.7 percent rise.
Rural CPI inflation slowed to 3.6 percent year-on-year in September from 6.7 percent in August and 33.9 percent in September 2023. Month-on-month, rural CPI fell 0.5 percent versus August’s 0.6 percent gain and September 2023’s 2.5 percent rise.
Core inflation, excluding energy and food items, slipped to 9.3 percent in cities and 12.1 percent in rural areas. The average core inflation is now almost 8 percent lower than the policy rate. The average inflation in the first three months also slipped to a single digit and was recorded at 9.2 percent.
Analysts say a high base effect, declining commodity and energy prices, and a stable rupee as key drivers of the slowdown.
“Aggressive monetary tightening has helped the State Bank of Pakistan (SBP) achieve inflation below the 7 percent target ahead of time,” said Mohammed Sohail, CEO of brokerage Topline Securities.
Pakistan’s inflation peaked at 38 percent in May 2023 but has declined since.
The September inflation reading undershot official expectations, with the finance ministry forecasting inflation to hover around 8-9 percent in September-October.
“With continued disinflation expected, mainly due to the high base effect and falling global commodities, this gives the SBP room to keep lowering the policy rate, as real interest rates are nearly 1090bps positive,” said Shahid Ali Habib, CEO of Arif Habib Limited.
Analysts said the slowing inflation figure also gives impetus to a further cut in the key policy rate.
The central bank has cut interest rates three times this year, saying it is confident that inflation is in check after it previously lifted rates to an all-time high of 22 percent.
In September, the central bank announced its most aggressive cut in the key policy rate since April 2020, reducing it by 200bps to bring it down to 17.5 percent amid slowing inflation and declining international oil prices.
Tota and Tota Associates said the central bank is still cautious with rate cuts, despite the economic slowdown and rapid decline in inflation.
“Moreover, to bring the policy rate in line with the appropriate real interest rate that matches the current inflationary environment, a reduction of 3.0 percent to 5.0 percent is recommended,” it said in a note. “The monetary policy should be part of the solution rather than contributing to the problem. A rate cut would support economic recovery and help alleviate the current cost-push inflation.”
Prime Minister Shehbaz Sharif praised his economic team for bringing to its lowest level in 44 months in September.
“Achieving the target of reducing inflation to 7 percent by 2025, already in 2024, is commendable,” Sharif said in a statement. “An inflation rate of 6.9 percent will provide relief to the common man.”
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