Pakistan’s inflation is expected to edge higher in July as rising food prices begin to outweigh the relief provided by lower fuel costs, signalling that the battle against inflation is far from over.
Economists at Growth Securities and JS Global expect the Consumer Price Index (CPI) to rise 9.1 percent year-on-year in July. Growth Securities also forecasts inflation to increase 1.1 percent from June, pointing to fresh monthly pressure on household budgets.
If realised, the July reading would be significantly higher than the 4.1 percent recorded in the same month last year and above the government’s average inflation target of 8.2 percent for FY27. It would also suggest that inflation is beginning to gather pace again after easing to 11.1 percent in June.
Analysts say food prices will be the biggest driver of the expected increase. Seasonal shortages have pushed up the prices of tomatoes, potatoes, onions and chicken, with the food index projected to rise around 1.4 percent from the previous month.
Cheaper petroleum products are expected to cushion some of that impact. Average petrol prices dropped to Rs312.53 per litre during the month, while High-Speed Diesel fell to Rs325.06 per litre. Lower LPG prices also helped reduce transport and household energy costs, although not enough to fully offset rising food prices.
According to Growth Securities, monthly inflation has remained persistently high in recent months, suggesting that underlying price pressures are still present despite the moderation seen in annual inflation figures.
Analysts are also keeping a close eye on developments in the Middle East. JS Global warned that any prolonged geopolitical tensions could increase global energy prices, raising Pakistan’s import bill and putting fresh pressure on inflation in the coming months.
The brokerage expects transport inflation to reach 21 percent year-on-year in July, while food inflation is also projected at 9.1 percent. It believes inflation could temporarily remain around 9 percent if energy markets stay volatile before easing once global conditions improve.
Among other categories, miscellaneous items are expected to post the highest annual increase at 11.3 percent, followed by clothing and food at 9.1 percent, education at 8.3 percent and health at 7.4 percent. Restaurant prices are forecast to rise 5.4 percent, while recreation and communication costs are expected to remain largely stable.
Despite the inflation outlook, both Growth Securities and JS Global expect the State Bank of Pakistan to leave its benchmark policy rate unchanged at 11.5 percent when its Monetary Policy Committee meets on July 27. They believe the central bank is likely to remain cautious as uncertainty over global energy prices continues.
Meanwhile, Pakistan’s weekly inflation indicator offered a mixed picture.
The Sensitive Price Indicator (SPI), which tracks the prices of 51 essential goods, eased to 9.66 percent year-on-year in the week ended July 23. However, it still remained above 10 percent for lower-income households, showing that inflation continues to hit the poorest families the hardest.
On a weekly basis, the SPI rose 0.91 percent. Tomatoes recorded the steepest increase, surging nearly 40 percent, followed by diesel, petrol, eggs and potatoes. In contrast, chicken, bananas and several varieties of pulses became cheaper during the week.
Out of the 51 essential items monitored by the Pakistan Bureau of Statistics, prices of 22 increased, eight declined and 21 remained unchanged.
Compared with a year earlier, tomatoes posted the biggest jump of more than 253 percent, while onions, wheat flour, LPG, diesel, electricity charges for low-income consumers and petrol also recorded sharp increases. Potatoes, sugar, chicken, eggs and several pulses were among the items that became cheaper over the same period.
The latest estimates suggest inflation has eased considerably from the highs seen last year, but volatile food supplies and uncertainty in global energy markets continue to pose risks for Pakistan’s cost of living.
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