Topline Securities, in a recent note, anticipates a substantial decline in Pakistan’s Consumer Price Index (CPI) based inflation starting January 2024. The firm projects an average CPI estimate of 18.5% over the next 12 months (Nov 2023-Oct 2024), with expectations for CPI to average 23% in FY24 and further reduce to 15% in FY25, compared to the higher figure of 29% in FY23.
The note also highlights a potential key development regarding the central bank’s policy, stating, “With clear signs of decline in inflation, we expect SBP policy rate to fall by 7% in 2024 to reach 15% by Dec 2024 compared to 22% now.” This implies a significant reduction in the State Bank of Pakistan’s key interest rate, aiming to stimulate economic activity.
The forecast aligns with recent sentiments expressed by the International Monetary Fund (IMF), which endorsed the expectation that inflation would decrease in the coming months due to receding supply constraints and modest demand. Notably, the year-on-year CPI inflation had risen to 26.9% in October 2023, but there are positive indicators, including the easing of inflation in October, attributed to measures such as fuel price reductions and crackdowns on illegal forex trade.
