Inflation may drop below 2pc in February: brokerage firm

KARACHI: Inflation is projected to decline to its lowest level in nearly a decade, with the Consumer Price Index (CPI) for February 2025 expected to ease to 1.99 per cent year-on-year (YoY), according to estimates by brokerage firm Arif Habib Limited (AHL). This would mark the lowest inflation rate since October 2015, when it stood at 1.61 per cent.

The projection is based on the first week’s data from the Sensitive Price Index (SPI), which also suggests a month-on-month (MoM) CPI decline of 0.37 per cent.

The overall decline is primarily attributed to a significant drop in food prices, with the food index registering a 1.7 per cent MoM decrease. The sharpest declines were seen in essential commodities such as tomatoes, onions and potatoes.

Conversely, transport costs edged up by 1.4 per cent MoM, driven by a slight increase in petroleum prices. Meanwhile, the housing index fell by 0.2 per cent MoM due to higher negative Fuel Cost Adjustment (FCA) adjustments.

AHL’s sensitivity analysis indicates that inflation could fluctuate within a broader range depending on month-on-month changes. If MoM inflation shifts between -1.5 per cent and +1.5%, the CPI for February could vary between 0.8 per cent and 3.9 per cent YoY.

The anticipated decline in inflation aligns with expectations of easing price pressures, potentially influencing monetary policy decisions in the coming months.

(CPI) inflation eased significantly to 2.4 per cent YoY in January 2025, down from 4.1 per cent in December and a staggering 28.3 per cent recorded in January 2024, according to data released by the Pakistan Bureau of Statistics (PBS) on Monday.

In FY23, inflation reached over 29 per cent; inflation touched an all-time high of 37.97 per cent in May 2023. However, it has been on a downward trajectory since then.

On a month-on-month basis, CPI inflation edged up slightly by 0.2 per cent in January, compared to a 0.1 per cent increase in the previous month and a 1.8 per cent rise in January 2024.

According to brokerage firm Topline Securities, inflation during 7MFY25 has averaged at 6.5 per cent compared to 28.7 per cent in 7MFY24. It further adds that this is the “lowest reading in 111 months (over nine years)”.