- We anticipate that headline inflation will reach 3.14% in July 2025, marking a slight decrease from the 3.23% year-over-year (YoY) inflation rate recorded in June 2025. When compared to the same period last year, we expect a significant decline in headline inflation; in July 2024, the inflation rate was 11.09% YoY.
- Core inflation (NFNE) remains persistent, with projections for July 2025 indicating an 8.1% YoY increase. Despite the YoY decline, we expect monthly inflationary pressures to continue in July 2025, with an anticipated rise of 2.0% month-over-month (MoM) driven by increases in the food, housing, and transport indices.
- Food inflation is projected to rise by 1.6% MoM, primarily due to higher prices for chicken, tomatoes, onions, and potatoes. The housing index is expected to increase by 4.4% MoM, largely attributed to a recent 50% increase in fixed gas charges for both protected and non-protected domestic users. Conversely, electricity charges are forecasted to decrease by 1.9% MoM, resulting from a negative Fuel Cost Adjustment (FCA) of PKR 0.50/kWh in May 2025 (which will apply in July 2025), as compared to a positive FCA of PKR 0.93/kWh in April 2025 (applicable in June 2025).
- The transport index is expected to rise by 4.9% MoM, following an upward adjustment in petroleum product prices.
- The moderation in YoY inflation is primarily attributed to a high base effect and easing food prices. Nevertheless, risks to this outlook remain, including the depreciation of the PKR and increases in food and domestic petroleum prices. Maintaining stability in these factors will be crucial for ensuring a favorable inflation trajectory.
- (Courtesy: AHL Research)
