Inflation eases to 9.6% in August, first single-digit rate since October 2021

Pakistan’s inflation rate dropped to 9.6 per cent in August 2024, a significant decrease from the 11.1 per cent recorded in July 2024, according to data from the Pakistan Bureau of Statistics (PBS).

This marks the first time in three years that inflation has returned to single digits, with the last instance being in October 2021 when it stood at 9.2 per cent.

On a month-to-month basis, the Consumer Price Index (CPI) saw a modest rise of 0.4 per cent in August 2024, compared to a 2.1 per cent increase in July 2024 and a 1.7 per cent rise in August 2023.

This slowdown in monthly inflation aligns with the predictions of the Ministry of Finance, which had anticipated inflation to fall between 9.5 per cent and 10.5 per cent in its recent economic outlook.

The Finance Ministry also suggested that if the current economic stability continues, inflation could drop further to between 9 per cent and 10 per cent by September 2024.

This decline in inflation follows the State Bank of Pakistan’s (SBP) decision to reduce the key policy rate by 100 basis points to 19.5 per cent in July.

The SBP had warned of potential inflation risks due to fiscal issues and sudden changes in energy prices, but the recent figures show a positive trend.

Inflation has been a major issue for Pakistan, especially after hitting a record high of 38 per cent in May 2023. However, it has been steadily decreasing since then.

The recent inflation data also matched projections from various financial institutions. JS Global, a brokerage firm, had predicted a 9.3 per cent inflation rate, noting that this would be the first time in three years that inflation dropped into single digits.

They believe this trend could lead to further interest rate cuts, with the policy rate possibly dropping to 18 per cent in September 2024.