June 30, 2025 (MLN): The Consumer Price Index (CPI) inflation is projected to settle at 3.34% YoY in June 2025, marking a substantial slowdown from the 12.57% recorded in the same month last year. However, this also represents an uptick from April’s multi-year low of 0.3%, indicating that the impact of the high base is starting to diminish.
This aligns with the Ministry of Finance’s latest Monthly Economic Outlook, released on Monday, which projected CPI inflation to remain in the range of 3% to 4% for June.
On a monthly basis, consumer prices are expected to edge up by 0.3%, driven largely by increases in housing and transport costs.
For the full fiscal year 2024-25, average inflation is estimated at 4.6%, a sharp drop from the 23.41% seen in FY24. This would be the lowest annual average since FY16, primarily attributed to the elevated base, softer food prices, and a decline in the transport index due to reduced petroleum prices.
In June, food inflation is expected to register a 2.7% rise on a yearly basis, though it is likely to dip by 0.3% MoM thanks to falling chicken prices.
Meanwhile, the housing index is projected to increase by 0.9% YoY on the back of higher electricity bills tied to a positive fuel cost adjustment (FCA) of Rs 0.93/KWh in April which was applied in June, compared to a negative FCA of Rs0.29/KWh in March which was applied in May.
Transport costs are forecast to climb by 0.9% MoM and 1.3% YoY, following the recent hike in fuel prices.
Looking ahead, the outlook for inflation remains cautious. Although the recent data reflects a significant cooling of price pressures, the other side of the coin may hold the pressure of the persistence of geopolitical tensions that pose a considerable risk to this trend.
Any escalation could disrupt global commodity markets, particularly oil, leading to renewed cost-push pressures that might spill over into domestic prices.
Additionally, uncertainty around regional trade flows and supply chain dynamics will likely continue to cast a shadow over the inflation trajectory, warranting close monitoring in the coming months.
On the monetary front, the State Bank of Pakistan’s Monetary Policy Committee recently decided to maintain the policy rate at 11%, citing the need to support the ongoing disinflationary momentum while ensuring financial stability.
With June’s inflation estimated at 3.34%, the real interest rate stands at a strong 7.7%. This high positive rate shows the central bank’s careful approach and gives it enough space to handle any external shocks, keep inflation under control, and support economic stability.
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