Pakistan’s consumer price inflation rose to 3.5% year-on-year in May 2025, according to data released by the Pakistan Bureau of Statistics (PBS) on Monday. This marks a notable increase from April’s unusually low rate of 0.3%, and surpassed both government expectations and market projections.
On a month-on-month basis, however, inflation declined by 0.2%, slightly less than the 0.8% drop recorded in April, suggesting that while disinflationary momentum has slowed, price levels continue to adjust downward at a moderate pace.
For the first 11 months of FY2024-25, average inflation stood at 4.61%, significantly lower than the 24.52% average recorded in the same period last year, highlighting the dramatic scale of disinflation over the fiscal year.
The increase in May is partly attributed to the waning base effect—May 2023 had seen a record CPI surge of 38%—which had previously suppressed year-on-year comparisons.
The latest reading also came in above official and private-sector expectations. The Ministry of Finance had forecast inflation to remain between 1.5% and 2%, while JS Global and Insight Securities had projected 2.7% and 3.4%, respectively.
The inflation uptick follows the State Bank of Pakistan’s recent monetary policy easing, where the central bank reduced the policy rate by 100 basis points to 11%, its lowest level since March 2022. The SBP has now cut rates by 1,100 basis points since June 2023, after inflation peaked and began its downward correction.
Urban CPI inflation rose to 3.5% year-on-year in May from 0.5% in April, while the month-on-month reading turned slightly positive at 0.1%. Rural CPI inflation was recorded at 3.4% year-on-year, compared to a 0.1% contraction in April. On a monthly basis, rural prices decreased by 0.5%, following a 1% drop in the previous month.
Despite the mild rebound, inflation remains at historically low levels. Analysts caution, however, that the disinflation cycle may have bottomed out, with prices expected to normalise in the coming months, especially as energy adjustments, food seasonality, and currency dynamics come into play.
The Finance Ministry, in its recent economic outlook, reiterated that the current account remains under control, aided by steady growth in exports and remittances, which could help manage inflationary pressures and support macroeconomic stability in the months ahead.
