Pakistan's inflation trajectory appears to be turning less comfortable just as the economy enters the new fiscal year, with rising food prices and renewed uncertainty over global energy markets threatening to push the cost of living higher. After easing to 11.1% in June, headline inflation is now expected to accelerate to 9.1% in July, according to market estimates, keeping policymakers cautious as they weigh the next interest rate decision. Market economists at Growth Securities and JS Global have projected July Consumer Price Index (CPI) inflation at 9.1% year-on-year, with the former also expecting a 1.1% month-on-month increase.
The forecast would mark a sharp rise from 4.1% inflation recorded in July 2025, while also exceeding the government's average inflation projection of 8.2% for FY27. Nasheed Malik of Growth Securities attributed the expected monthly increase mainly to higher food prices, although the impact is likely to be partly offset by lower fuel and LPG prices. The food index is projected to rise around 1.4% month-on-month, led by sharp increases in tomatoes, potatoes, chicken and onions due to seasonal factors.
At the same time, lower petroleum prices are expected to provide some relief. Average petrol prices declined 17.7% month-on-month to Rs312.53 per litre, while High-Speed Diesel (HSD) prices fell 14.9% to Rs325.06 per litre, pushing the transport index down an estimated 0.8% during the month. LPG prices also declined 13.3%, contributing a modest negative impact on headline inflation.
According to SBP data cited by Malik, month-on-month CPI trends have remained elevated in recent months, underscoring continued price pressures despite the moderation in annual inflation. JS Global's Muhammad Waqas Ghani, however, highlighted the risk posed by renewed geopolitical tensions in the Middle East, saying elevated energy costs could add pressure to Pakistan's inflation outlook. The brokerage expects transport inflation to rise 21% year-on-year in July, while food inflation is also projected at 9.1%.
JS Global has also flagged a downside risk scenario in which prolonged Middle East tensions push up imported energy costs and temporarily lift inflation towards 9%, before easing to around 8% as geopolitical conditions stabilise. Elsewhere in the CPI basket, the report projects miscellaneous items to record the highest year-on-year increase of 11.3%…
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