Pakistan’s headline inflation is expected to ease further in December 2025, with the Consumer Price Index (CPI) projected in the range of 5.75 to 6.25 per cent year-on-year, according to Topline Pakistan Research.
In its latest outlook, the brokerage firm said December inflation would come in lower than the 6.15% recorded in November 2025, though higher than the 4.07% in December 2024. On a month-on-month basis, inflation in December 2025 is expected to decline by 0.18pc.
For the full calendar year 2025, inflation is projected to average 3.54%, marking the lowest annual inflation reading in a decade. This compares with an average inflation rate of 13.13% in 2024.
Topline attributed the sharp disinflationary trend mainly to subdued food prices and lower pressure from housing and utilities. Food inflation during 2025 is expected to average 0.63% year-on-year, compared with 6.27% in 2024, while inflation in housing, water and electricity is projected at 1.48% against 26% last year. However, the report noted that food inflation has picked up in recent months due to flood-related supply disruptions.
On a monthly basis, December inflation was partly driven by a 0.75% increase in the housing, water and electricity category, led by a 15% rise in liquefied petroleum gas (LPG) prices and an estimated 2.3% increase in solid fuel costs.
Food prices, meanwhile, are expected to decline 1.4% month-on-month, supported by a sharp fall of 15–25% in potato, onion and tomato prices. Sugar and fresh vegetable prices are also projected to drop by 6–8% during the month.
The transport segment is expected to remain largely unchanged, as fuel prices declined by a marginal 0.1% during December.
Following a surprise 50 basis points cut in the policy rate in December 2025, Topline estimates the real interest rate at around 450 basis points, which remains above Pakistan’s historical average range of 200–300bps.
Looking ahead, inflation in the second half of FY26 is expected to average around 9%, compared with 5.2% in the first half. June 2026 inflation is projected at around 11%, before gradually converging towards the central bank’s medium-term target range of 5–7%. The brokerage has maintained its full-year FY26 inflation forecast at 6.5–7.5%.
The report cautioned that global commodity price movements remain a key risk that could significantly alter the inflation outlook in the coming months.
