KARACHI: Pakistan's headline inflation stood at 0.7% on a year-on-year basis in March 2025, marking a significant decline compared to February 2025 when it was recorded at 1.5%.

According to data released by the Pakistan Bureau of Statistics (PBS), inflation on a month-on-month basis increased by 0.9% in March 2025, compared to a decrease of 0.8% in the previous month and an increase of 1.7% in March 2024.

This marks the lowest inflation reading since December 1965, a 59-year low, according to the State Bank of Pakistan (SBP) data. Arif Habib Limited (AHL), a brokerage firm, noted in a report that the Consumer Price Index (CPI) inflation for the first nine months of fiscal year 2025 (9MFY25) averaged 5.25%, a stark contrast to the 27.06% CPI inflation during the same period in fiscal year 2024 (9MFY24). Inflation has been a major economic challenge for Pakistan, particularly in recent years. In May 2023, the CPI inflation rate had surged to a record high of 38%. However, since then, the inflationary trend has steadily declined, with March 2025 marking a significant drop.

The Finance Division had earlier projected headline inflation to remain within the range of 1-1.5% in March 2025, and the actual reading came in line with these forecasts. The report further indicated that inflation was expected to remain between 1.0% and 1.5% in March, with a potential rise to 2-3% in April 2025. The Monetary Policy Committee (MPC) of the State Bank of Pakistan, in its last meeting, decided to maintain the policy rate at 12%. In its statement, the MPC highlighted that inflation in February 2025 had been lower than expected, primarily due to a decrease in food and energy prices. Despite this, the committee expressed concerns about the volatility of these prices and how it could affect the ongoing decline in inflation.

The committee also noted that core inflation remained persistent at elevated levels, and a rise in food and energy prices could potentially lead to an increase in overall inflation. Urban and Rural Inflation The PBS data also revealed a detailed breakdown of inflation in urban and rural areas. Urban CPI inflation decreased to 1.2% on a year-on-year basis in March 2025, down from 1.8% in the previous month and significantly lower than the 21.9% recorded in March 2024.

On a month-on-month basis, urban inflation increased by 0.8% in March 2025, compared to a decrease of 0.7% in February 2025 and an increase of 1.4% in March 2024. Rural CPI inflation showed no change on a year-on-year basis in March 2025, remaining at 1.1%, compared to 19% in March 2024.

On a month-on-month basis, rural inflation rose by 1.1% in March 2025, compared to a decrease of 1.1% in February 2025 and an increase of 2.1% in March 2024. Outlook The latest CPI reading is in line with the projections made by several brokerage houses, including Topline Securities, which had anticipated headline inflation to remain between 0.5% and 1% in March 2025, marking the lowest monthly year-on-year inflation reading in over three decades. As inflation in Pakistan continues its downward trajectory, the government and the central bank will closely monitor the evolving situation, especially the impact of food and energy prices, as they remain crucial factors in shaping the future inflation outlook for the country. 

The continued efforts to stabilize inflation are seen as essential for restoring economic confidence and supporting Pakistan's recovery.