ISLAMABAD: Pakistan’s year-on-year inflation increased to 3.5% in May 2025, up from 0.3% in April, according to data released by the Pakistan Bureau of Statistics (PBS) on Monday. Despite the increase, average inflation for the first 11 months of FY2025 stood at 4.61%, a sharp decline from 24.52% during the same period last year.
On a month-on-month basis, inflation declined by 0.2% in May, compared to a 0.8% drop in April and 3.2% in May 2024.
The rise in May’s inflation outpaced projections from both the Finance Ministry and brokerage houses, which had expected a milder increase between 2.7% and 3.4%. The ministry had projected inflation between 1.5% and 2%, expecting it to pick up slightly in June.
The State Bank of Pakistan (SBP) recently cut its policy rate by 100 basis points to 11%, marking a total reduction of 1,100 basis points from the record high of 22% set in June 2023.
Urban and Rural Inflation
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Urban CPI inflation (YoY): 3.5% (vs. 0.5% in April 2025 and 14.3% in May 2024)
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Urban CPI inflation (MoM): +0.1%
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Rural CPI inflation (YoY): 3.4% (vs. -0.1% in April 2025 and 8.2% in May 2024)
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Rural CPI inflation (MoM): -0.5%
While inflation remains low compared to past highs (e.g., 38% in May 2023), the uptick in May 2025 may indicate a normalization of price trends after a prolonged period of disinflation due to base effects.
The government remains optimistic, pointing to rising exports and remittances as stabilizing factors for the current account in the coming months.
