Pakistan’s consumer price inflation rose to 5.8% on a year-on-year basis in January, according to official data released by the Pakistan Bureau of Statistics (PBS), highlighting persistent price pressures even as overall macroeconomic conditions show signs of stabilisation. The latest reading underscores the State Bank of Pakistan’s (SBP) recent caution that inflation could temporarily move above its comfort range as economic activity continues to recover.
The January inflation figure compares with a reading of 5.6% recorded in December, when consumer prices had eased slightly on a month-on-month basis due to a decline in the cost of perishable food items. In contrast, January saw a modest pickup in monthly inflation, with consumer prices rising 0.4% compared to the previous month, indicating renewed upward pressure on household expenses.
The data was released just a week after the SBP decided to keep its benchmark policy rate unchanged at 10.50%. At the time, the central bank had warned that inflation could exceed its medium-term target band of 5% to 7% for a few months during 2026, as domestic demand strengthens and imports increase alongside economic growth. The January reading appears to align with that assessment, reinforcing the central bank’s cautious stance on monetary policy.
According to the SBP, the current level of the real policy rate remains sufficiently positive to help stabilise inflation over the medium term. However, the central bank has also pointed to stronger domestic demand and external sector pressures as key upside risks to the inflation outlook. As economic activity picks up, higher consumption and increased import demand could add to price pressures, particularly if global commodity prices remain volatile.
The Ministry of Finance had earlier projected that inflation in January would remain within the range of 5% to 6%, placing the actual outcome near the upper end of official expectations. While the figure does not signal a sharp acceleration, it suggests that the disinflationary trend seen in recent months may be losing some momentum.
Meanwhile, international stakeholders continue to urge caution. A recent staff report by the International Monetary Fund (IMF) warned against premature monetary easing under Pakistan’s $7 billion loan programme. The IMF advised policymakers to remain firmly data-dependent in their decision-making in order to anchor inflation expectations and rebuild external buffers, particularly at a time when the economy is transitioning from stabilisation to gradual recovery.
Overall, the January inflation data highlights the delicate balance facing policymakers. While inflation remains significantly lower than the peaks witnessed during the recent crisis period, the latest figures suggest that price stability is not yet fully secured. As growth resumes, maintaining a tight grip on inflation through prudent monetary and fiscal coordination will remain a central challenge for Pakistan’s economic managers in the months ahead.
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