Karachi: October witnessed the Consumer Price Index (CPI) in Pakistan stabilizing at 7.2%, influenced by a favorable comparison to last year’s high inflation rates. The moderation in food inflation, which had previously reached hyperinflationary levels, significantly contributed to the CPI’s current status.

According to JS Global, the CPI’s moderation is primarily attributed to a favorable base effect from the previous year, with food inflation calming to 0.9% year-over-year in October. Looking forward, JS Global forecasts an overall inflation rate of 8.5% for fiscal year 2025, anticipating a temporary spike in the latter half of the year. Currently, the real interest rate (RIR) stands at approximately 10.3 percentage points, with an anticipated peak CPI reading of 12.9% by June 2025, suggesting an RIR of 4.6 percentage points at the current policy rate.

In response to these developments, a fourth consecutive interest rate cut of 150 basis points is expected in today’s monetary policy announcement, potentially lowering the policy rate to 16%. The decline in secondary market yields, which have dropped around 695 basis points, has outpaced the policy rate cut of approximately 450 basis points since the start of the easing cycle in June 2024.

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