Pakistan’s inflation held at 6.1% in November, but core non-food, non-energy prices decelerated, fueling calls for lower interest rates amid a fragile recovery.
Headline Inflation Holds Above 6% for Second Month
Pakistan’s inflation rate stayed above 6% for the second consecutive month, but key indicators suggest that underlying price pressures are starting to cool. The Pakistan Bureau of Statistics (PBS) reported that headline inflation remained stable at around 6.1% in November on a year-on-year basis.
While the headline figure stayed elevated, two important measures—monthly inflation and non-food, non-energy inflation—slowed during November. Economists see this deceleration as a sign that there was no fresh buildup of price pressure last month, even though the top-line number did not drop.
PBS data showed that in urban areas, annual inflation inched up to 6.1%, whereas in rural areas and towns it eased to 6.3%. The figures reflect a mixed picture, with some categories still facing cost pressures while others begin to stabilise.
Core Inflation Cools, Easing Long-Term Price Concerns
Core inflation, which excludes volatile food and energy items, offers a clearer view of long-term price trends. In November, this measure slowed noticeably, hinting that inflationary pressure may be easing below the surface.
According to PBS, urban core inflation fell to 6.6% from 7.5% a month earlier, while rural core inflation eased to 8.2% from 8.4%. Because core inflation filters out seasonal swings and commodity shocks, the decline suggests that the recent spike in prices may be temporary rather than the start of a new upward cycle.
Even so, the World Bank recently revised its inflation forecast for Pakistan upward to 7.2% for the current fiscal year—slightly above the government’s target.
Debate Intensifies Over High Interest Rates
Despite lower core inflation, the central bank has so far resisted strong calls from the business community and political leadership to cut interest rates. The monetary policy committee has kept the main policy rate unchanged at around 11%, well above the current level of headline inflation.
Lt General Sarfraz Ahmad, National Coordinator of the Special Investment Facilitation Council (SIFC), argued recently that monetary policy must reflect what he called “ground reality”. He said the central bank cannot keep interest rates permanently at 11% or 12% when inflation is on a downward path.
The Ministry of Finance, in its latest monthly report, described Pakistan’s economic outlook as cautiously optimistic. It said industrial activity is strengthening as economic reforms take hold and projected inflation in the 5% to 6% range for November, although the actual rate, at 6.1%, slightly exceeded that band.
The central bank, however, is keeping interest rates high even as it expects the 4.2% growth target to be missed again this fiscal year. Finance Minister Muhammad Aurangzeb has said that recent summer floods alone have shaved about half a percentage point off growth.
Food Prices and Energy Costs Still Hurt Households
Even as core inflation eases, many households continue to feel the pinch from food and utility prices. Data showed that food price inflation accelerated to 5% in cities but eased to 5.9% in rural areas as some perishable items became cheaper.
Several key staples remain significantly more expensive than a year ago. Sugar prices were 39% higher after millers delayed the crushing season, taking advantage of tight supplies. Butter became 27% more expensive, while wheat prices climbed 22%.
On the energy side, gas charges increased 23% on an annual basis, adding to pressure on household budgets. Electricity prices also jumped 7.1% on a month-on-month basis, deepening concerns over the rising cost of living.
Job Market Strain and Rising Emigration
Pakistan’s economy has struggled to create enough decent jobs for new entrants to the workforce, and persistent price pressures have eroded purchasing power. As real incomes come under strain, more people are looking for opportunities abroad.
According to the Ministry of Finance’s monthly report, which cites data from the Bureau of Emigration & Overseas Employment, about 90,339 workers left Pakistan in October alone—an increase of 22.8% compared to September.
For policymakers, the challenge will be to balance inflation control with growth and employment. While slowing core inflation gives some space for future rate cuts, the combination of high borrowing costs, climate shocks and weak job creation continues to weigh on the country’s economic outlook.
