Pakistan has witnessed a remarkable drop in inflation, reaching its lowest point in nearly a decade. The latest figures from the Pakistan Bureau of Statistics (PBS) reveal that the Consumer Price Index (CPI) inflation for January 2025 stands at just 2.41%. This is a sharp decline from the 4.1% recorded in December 2024 and a drastic fall from the 28.3% seen in January 2024. In fact, this marks the lowest inflation rate in the past 111 months, offering a glimmer of hope for Pakistan’s economy.
Throughout the first seven months of the 2025 fiscal year (7MFY25), inflation has averaged 6.5%. This is a huge improvement compared to the same period last year (7MFY24), when inflation averaged 28.73%. This dramatic shift is seen as a much-needed relief for businesses, households, and the overall economy.
Breaking down the figures, inflation has dropped significantly in both urban and rural areas. In urban areas, CPI inflation fell to 2.7% year-on-year in January 2025, down from a staggering 30.2% in January 2024. Rural areas experienced an even greater reduction, with inflation falling to 1.9% from 25.7% the previous year. This widespread decline in inflation is particularly promising for food prices, which have been a major contributor to the overall rise in inflation.
The Sensitive Price Indicator (SPI), which tracks the prices of everyday essentials, has also seen a sharp decline. SPI inflation was just 0.7% in January 2025, compared to a much higher 36.2% in the same month last year. On a month-to-month basis, SPI fell by 1.4%, signaling that the rise in the prices of basic commodities is starting to be contained.
Wholesale Price Index (WPI) inflation also showed improvement, dropping to 0.6% year-on-year in January 2025, a significant reduction from the 27.0% recorded in January 2024. Although WPI inflation rose by 0.2% compared to the previous month, the year-on-year decrease indicates that prices for bulk goods and raw materials are stabilizing.
Core inflation, which excludes volatile food and energy prices, also showed signs of easing. In urban areas, core inflation decreased to 7.8% in January 2025, down from 17.8% in January 2024. In rural areas, it fell to 10.4% from 24.6%. This suggests that inflationary pressures are easing not just for consumer goods, but for the economy as a whole.
The trimmed mean core inflation, a measure that excludes extreme values, also saw a drop. In urban areas, it fell to 5.4% year-on-year in January 2025, compared to 22.1% in the previous year. Rural areas also saw a decrease, with trimmed mean core inflation dropping to 5.4% from 25.8%. While there was a slight month-to-month increase, the overall trend remains positive.
This significant reduction in inflation is a win for both consumers and businesses. For consumers, it means greater purchasing power, with everyday goods and services becoming more affordable. For businesses, it creates a more stable economic environment, allowing companies to plan with more certainty and manage costs more effectively.
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