By Pakistan experienced a significant decrease in headline inflation, dropping to 20.7 percent year-on-year in March, according to the latest data released by the Pakistan Bureau of Statistics (PBS) on Monday.
This marks a notable improvement from February’s figure of 23.1 percent. Additionally, on a month-on-month basis, inflation increased by 1.7 percent.
This is the lowest inflation reading since May 2022, when it was reported at 13.8 percent. It also marks a significant milestone, being the first time in over three years that the Consumer Price Index (CPI)-based inflation figure has fallen below the crucial policy rate, currently set at 22 percent.
The average inflation for July to March now stands at 27.22 percent, slightly higher than the same period last year at 27.19 percent.
The inflation figure, lower than the government’s projections, suggests the possibility of a reduction in the key interest rate.
The Ministry of Finance, in its ‘Monthly Economic Update and Outlook’ report released on Friday, forecasted CPI-based inflation to range between 22.5-23.5 percent for March 2024.
Despite recent increases in petrol prices and the start of Ramadan, inflation in March has been perceived at a moderate level by the ministry.
The government’s announcement of a relief package for Ramadan, with an increased allocation from Rs7.5 billion to Rs12.5 billion, is expected to alleviate the impact of heightened demand during the religious festival.
Furthermore, the moderation of inflationary pressures is partially attributed to the phenomenon of the high base effect, as highlighted in the outlook report.
Global factors have also influenced inflation dynamics, as noted by brokerage house Arif Habib Limited (AHL), which predicts a further decline in inflation with a year-on-year headline inflation rate of 20.2 percent for March 2024.
Similarly, IGI Securities projects the national CPI to grow at a year-on-year rate of 20.3 percent, with a monthly growth of +1.4 percent compared to February 2024.
Despite the recent increase in gasoline prices by the government, experts anticipate inflation to remain below 20 percent in the upcoming months, primarily due to the high base effect.
This development fuels speculation regarding potential monetary policy adjustments in the near future.
