Pakistan Inflation Rate for May 2025 Exceeds Forecasts

ISLAMABAD: The Pakistan inflation rate in May 2025 climbed to 3.5% year-on-year, significantly higher than April’s 0.3% figure, according to data released by the Pakistan Bureau of Statistics (PBS) on Monday.

The latest PBS report shows the Pakistan inflation rate in May 2025 outpaced government and analyst projections. Monthly inflation declined by 0.2% in May, compared to a 0.8% drop in April 2025 and a 3.2% decline in May 2024.

The Consumer Price Index (CPI) inflation averaged 4.61% during the first 11 months of FY25 (11MFY25), a sharp fall from 24.52% recorded in the same period last year.

Urban and Rural CPI Breakdown

Urban CPI inflation rose to 3.5% year-on-year in May, up from 0.5% in April 2025 and 14.3% in May 2024. On a month-on-month basis, it edged up by 0.1%.

Rural inflation climbed to 3.4% YoY in May 2025, reversing a 0.1% decline in April and compared to 8.2% in May 2024. Month-on-month rural CPI dropped by 0.5%, less than the 1.0% fall seen the previous month.

This CPI uptick comes after the State Bank of Pakistan (SBP) reduced the key policy rate by 100 basis points to 11% last month, its lowest level since March 2022. The SBP has slashed rates by a cumulative 1,100bps since June 2023, when interest rates peaked at 22%.

Despite expectations from the Finance Ministry that May’s inflation would ease to between 1.5% and 2%, the actual figure was notably higher. The ministry still anticipates inflation will stabilize around 3%-4% in June.

Brokerage firms had also underestimated the rise. JS Global projected a 2.7% increase, citing base effect normalization, while Insight Securities forecasted 3.4%.

Despite the unexpected inflation spike, the Finance Ministry remains optimistic.

“Exports and remittances are expected to maintain their upward trend in the coming months, keeping the current account within a manageable range,” the ministry noted.

This surprising surge in the Pakistan inflation rate in May 2025 marks a possible shift in the economic trend, raising concerns over future price stability and central bank policy directions.