Pakistan’s annual inflation clocked in at 3.5% on a year-on-year basis in May 2025, exceeding expectations. This rate is higher than April 2025’s 0.3% and the government’s prediction of 1.5-2%, while some analysts forecasted 2.7% or 3.4%. On a month-on-month basis, prices decreased by 0.2% in May 2025.
The average inflation rate for 11 months of the financial year 2024-25 stands at 4.61%, significantly down from 24.52% in the same period the previous year.
Urban vs. Rural Inflation
Urban areas saw inflation rise to 3.5% year-over-year and 0.1% month-over-month. Rural areas experienced a 3.4% year-over-year increase but a 0.5% month-over-month decrease.
Recent Developments
The State Bank of Pakistan recently cut interest rates by 100 basis points to 11%, the lowest since March 2022. Inflation had peaked at 38% in May 2023 but has been declining since then. Other notable inflation metrics include ¹:
SPI inflation: decreased by 0.6% year-over-year and 1% month-over-month
WPI inflation: increased to 0.4% year-over-year with no change month-over-month
Core inflation (NFNE): slightly decreased to 7.3% year-over-year in urban areas and 8.8% in rural areas
