Pakistan’s headline inflation registered at 6.9% year-on-year in September 2024, a decrease from 9.6% in August, according to data from the Pakistan Bureau of Statistics (PBS) released on Tuesday. This marks the lowest consumer price index (CPI) reading since January 2021.

Mohammed Sohail, CEO of Topline Securities, noted that “due to aggressive monetary tightening, the State Bank of Pakistan (SBP) has successfully reduced inflation below the one-year target of 7% ahead of schedule.”

On a month-to-month basis, the CPI fell by 0.5% in September 2024, contrasting with a 0.4% rise in the previous month and a 2.0% increase in September 2023.

Experts attribute the decline in inflation to several factors, including a high base effect, decreasing global commodity and energy prices, and a stable exchange rate.

The latest figure is also lower than the government’s expectations. The finance ministry had projected inflation to slow further in the coming months (September-October) to around 8-9%, as stated in its monthly economic outlook released on Friday.

The Ministry of Finance indicated, “Inflation is expected to stay within the 8% to 9% range for September and October 2024” in its ‘Monthly Economic Update and Outlook.’

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This decline in inflation could pave the way for additional cuts in the key policy rate.

In September, the SBP implemented its most significant reduction in the key policy rate since April 2020, cutting it by 200 basis points to 17.5% in response to falling inflation and decreasing international oil prices.

Shahid Ali Habib, CEO of Arif Habib Limited, commented, “With continued disinflation expected, driven primarily by the high base effect and lower global commodity prices, the SBP has room to further reduce the policy rate, as real interest rates are nearly 1090 basis points positive.”

Inflation has been a major and persistent economic challenge for Pakistan, particularly in recent years. In May of last year, the CPI inflation rate reached a record high of 38%, but it has been on a downward trend since then.

Additionally, the latest inflation reading was lower than projections made by several brokerage firms.