- Inflation in May’25 is expected to be 3.0% YoY, up from 0.3% in April ’25 and down from 11.8% in May’24, as base effects continue to fade. On a monthly basis, CPI is likely to decline by 0.6% MoM, posting the second consecutive drop, mainly due to a 2.3% fall in food prices amid improved supply of perishables. However, poultry shortages are expected to push egg and chicken prices up by 32.8% and 20.7% MoM, respectively.
- The transport index is expected to decline by 0.7% MoM due to lower fuel prices, while the clothing and footwear index is projected to rise by 1.2% MoM.
- On a YoY basis, food inflation is anticipated to ease to 0.9%, but non-food inflation is likely to remain elevated, led by healthcare (+12.5%), education (+10.4%), clothing (+9.9%), and restaurants (+8.4%).
- For FY25, average inflation is projected to range between 5-6% YoY, significantly lower than 23.4% YoY in FY24.
Key factors contributing to the lower inflation in FY25 include:
- A high base effect from the previous year
- Stabilization of the PKR
- Declining international crude oil prices
- Approval of the IMF tranche, boosting macroeconomic confidence
- Power tariff adjustments, easing energy-related cost pressures
However, inflationary pressures may re-emerge in FY26, as the high base effect fades and the upcoming budget is expected to introduce new tax measures aligned with IMF revenue targets, potentially pushing prices upward.
Courtesy – CPI for May’25 to clock in at 3.0% YoY: AHCML Research
