Pakistan’s Inflation Slows to 11.8% in May, Marking Lowest Rate in 30 Months

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Pakistan’s Inflation Slows to 11.8% in May
Pakistan’s Inflation Slows to 11.8% in May (image via Reddit)

In a significant development, Pakistan’s inflation rate has decelerated to 11.8% in May, marking the lowest reading in 30 months. This decline comes as a relief for the country, which has been grappling with persistently high inflation since May 2022.

Key Points

  1. May Inflation Rate: 11.8%
    • Pakistan’s consumer price index (CPI) rose by 11.8% in May compared to the previous year.
    • The decline in inflation is a positive sign for the economy, as it indicates some stabilization after a prolonged period of surging prices.
  2. Historic High Key Rate
    • The recent inflation data arrives just ahead of the central bank’s policy meeting. Notably, the key interest rate has remained at a historic high of 22% for seven consecutive policy meetings.
    • The central bank’s deliberations will be closely watched, as they consider the appropriate monetary policy stance in light of the improving inflation outlook.
  3. Month-on-Month Price Decline
    • In a noteworthy development, month-on-month consumer prices fell by 3.2% in May. This represents the most significant drop in more than two years.
    • The reduction in prices across various categories contributed to the overall easing of inflationary pressures.
  4. Finance Ministry’s Projections
    • The finance ministry had projected that inflation would hover between 13.5% and 14.5% in May. However, the actual reading came in even lower at 11.8%.
    • The ministry expects further moderation, with inflation easing to 12.5% to 13.5% by June 2024.
  5. Factors Contributing to the Decline
    • The improved inflation outlook can be attributed to several factors:
      • Domestic Supply Chain Improvements: The supply chain for perishable items and staple foods like wheat has shown resilience, leading to lower prices.
      • Reduced Transportation Costs: A decrease in transportation expenses has also played a role in curbing inflation.
      • Economic Reforms: Pakistan’s efforts to implement reforms as part of an International Monetary Fund bailout program have contributed to the overall stabilization.
  6. Expert Insights
    • Amreen Soorani, head of research at JS Global Capital, emphasized that the sharper dip in food prices was a key driver behind the lower inflation rate.
    • The positive trend suggests that the country is gradually moving toward a more sustainable inflation trajectory.

Key Highlights

AspectDetails
May Inflation Rate11.8%
Historic High Key Rate22% (unchanged for seven consecutive policy meetings)
Month-on-Month DeclineConsumer prices fell by 3.2% in May (most significant drop in over two years)
Finance Ministry’s ViewExpected inflation to be between 12.5% and 13.5% by June 2024
Contributing Factors- Domestic supply chain improvements
- Reduced transportation costs
- Economic reforms
Expert Insights- Food prices played a key role in lowering inflation
- Positive trend toward sustainability

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