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
- 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.
- 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.
- 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.
- 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.
- 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.
- The improved inflation outlook can be attributed to several factors:
- 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
| Aspect | Details |
|---|---|
| May Inflation Rate | 11.8% |
| Historic High Key Rate | 22% (unchanged for seven consecutive policy meetings) |
| Month-on-Month Decline | Consumer prices fell by 3.2% in May (most significant drop in over two years) |
| Finance Ministry’s View | Expected 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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