Pakistan witnessed a notable slowdown in inflation during February 2025, driven primarily by significant declines in food and energy prices. According to official data, the Consumer Price Index (CPI) inflation dropped to 1.5 percent year-on-year (YoY), down from 2.4 percent recorded in January 2025. This marks a dramatic decrease compared to the same month last year, when inflation stood at a staggering 23.1 percent.
The downward trend is also reflected in the month-on-month (MoM) figures. CPI inflation decreased by 0.8 percent in February, a reversal from the 0.2 percent rise recorded the previous month. This cooling of inflation is a welcome development for consumers and policymakers alike, particularly after enduring months of elevated price levels that had put considerable pressure on household budgets and monetary policy decisions.
The headline inflation figures are underpinned by mixed trends across major consumption categories. While core inflation categories such as Health, Clothing & Footwear, and Education continued to register upward pressure, the relief in food and energy segments was significant enough to offset the overall inflation rate.
Among the key drivers contributing to the year-on-year CPI increase were Health expenses, which surged by 14.3 percent, followed by Clothing & Footwear at 13.8 percent. Education costs also climbed by 10.9 percent, while Restaurants & Hotels recorded a 7.6 percent increase. Prices in the Alcoholic Beverages & Tobacco segment went up by 6.7 percent, while Furnishing & Household Equipment Maintenance saw a moderate 4.5 percent rise. Communication services, often stable in price movements, registered a marginal uptick of 0.1 percent.
Conversely, sharp deflation was recorded in several crucial categories. Perishable food items saw the steepest price decline, plunging by 20.3 percent. Non-perishable food items also decreased by 1.5 percent. The transport sector, typically sensitive to fuel prices, experienced a 1.1 percent decline, while the Housing, Water, Electricity, Gas, and Fuels category slipped by 0.6 percent — a trend largely tied to easing global oil and gas prices and domestic adjustments in energy tariffs.
Supporting this trend, the Sensitive Price Index (SPI) for the week ending March 20, 2025, recorded a decline of 0.35 percent compared to the previous week. Of the 51 items monitored in the SPI basket, prices of 18 items decreased, 22 items remained stable, and 11 items showed an increase. This mixed but largely stable price environment indicates that inflationary pressures are continuing to ease across most basic commodities.
The decline in inflation is particularly important in the context of Pakistan’s ongoing macroeconomic stabilization efforts. It offers breathing room to monetary policymakers, who may now have greater flexibility in adjusting interest rates to spur investment and economic growth. For consumers and businesses alike, lower inflation supports purchasing power and operational predictability.
This inflationary slowdown, underpinned by declining food and energy prices, could pave the way for a more stable economic environment in the remaining months of FY2025. However, economists caution that continued vigilance is needed, especially in monitoring global commodity markets and local supply chain conditions, to sustain this positive momentum.
As Pakistan’s economy navigates a complex mix of recovery signals, this drop in inflation stands out as a positive indicator that may contribute to improved confidence across sectors.