Pakistan’s Consumer Price Index (CPI) for Dec 2025 is expected to clock in at 5.75-6.25% YoY compared to 6.15% in Nov 2025 and 4.07% in Dec 2024. On a MoM basis, inflation for Dec 2025 is projected at -0.18%.
During 2025, Inflation is likely to average 3.54%, the lowest yearly inflation in a decade, compared to the 2024 average of 13.13%. The significant slowdown in the pace of inflation during 2025 is on the back of both muted food inflation of 0.63% YoY (2024: 6.27% YoY) and housing, water & electricity inflation of 1.48% YoY (2024: 26%). Nonetheless, in the last few months, food inflation spiked amidst floods.
During Dec 2025, the MoM increase was driven by 0.75% hike in housing, water & electricity, primarily led by 15% hike in LPG, and ~2.3% hike in solid fuel.
Topline analysts said that Food inflation is expected to fall 1.4% MoM due to 15-25% decline in Potatoes, Onions and Tomatoes prices. Furthermore, sugar and fresh vegetable prices are also expected to fall 6-8%.
Transport segment is expected to largely remain flattish as fuel prices have declined by a meagre 0.1%.
Real Rate in Dec 2025: With the surprise cut of 50bps in Dec 2025, the real rate is expected to be 450bps, higher than Pakistan’s historic average of 200-300bps.
Inflation Outlook: Topline analysts said that inflation in 2HFY26 is expected to average 9% (1HFY26: 5.2%) with Jun 2026 inflation expected around 11% and then subsequently diverging towards the central bank’s medium term target range of 5.0-7.0%. We maintain our FY26 inflation target of 6.5-7.5%.
Key Risks: A significant shift in global commodity prices remains a major variable that could alter the inflation trajectory moving forward.
