Pakistan inflation cools in December, backing rate cut to spur growth

Dubai: Pakistan’s inflation rate rose slower-than-expected in December, justifying the central bank’s decision to cut its policy rate to a three-year low to support growth.

The consumer price index rose 5.6% in December from a year earlier, according to data released by the Pakistan Bureau of Statistics on Thursday. That compares with a 5.8% median estimate in a Bloomberg survey. The reading was also lower than 6.1% in November.

The State Bank of Pakistan cut the policy rate by 50 basis points on Dec. 15 to the lowest level in almost three years, citing stable price pressures and a need to spur growth after holding rates steady for four straight policy meetings. The finance ministry forecast inflation of 5.5%-6.5% for December. 

Food costs rose 3.24% last month from a year earlier, slowing from 5.53% in November. Housing & energy prices climbed 6.86% in December, compared with 5.34% a month earlier, bureau data showed.

“We expect inflation to average 6.3% in FY26 and 4% in FY27, based on our assumptions of improved food supplies, subdued international oil prices, and lower periodic energy price adjustments,” said Muhammad Awais Ashraf, director AKD Securities Research. “However, fiscal slippages, global energy supply shocks, and climate-change effects remain key risks to our inflation projections.”