Pakistan’s CPI inflation eased to 5.6% year-on-year in December 2025, down from 6.1% in November. The data, released by the Pakistan Bureau of Statistics on Wednesday, January 1, 2026, showed prices fell on a monthly basis. Lower perishable food prices drove the decline.
The inflation slowdown in Pakistan CPI inflation signals progress in economic stabilisation efforts. As a major South Asian economy, Pakistan’s trends affect regional trade partners like India and Bangladesh through supply chains and remittances. Reduced inflation could enhance consumer spending and attract foreign investment.
December 2025 Pakistan CPI Inflation Details
Urban CPI inflation stood at 5.8% year-on-year in December 2025, compared to 6.1% in November. Rural CPI inflation was 5.4%, down from 6.3%. On a monthly basis, food prices dropped 1.7%, led by declines in perishable items across urban and rural areas.
Non-food inflation remained elevated in both regions. The State Bank of Pakistan noted core inflation stayed sticky despite the headline drop.
The finance ministry had projected Pakistan CPI inflation between 5.5% and 6.5% for December 2025 in its monthly outlook. The actual 5.6% YoY figure aligned with the lower end of this range.
Factors Behind the Inflation Slowdown
Lower food prices contributed significantly to the inflation slowdown. Perishable items saw sharp declines due to seasonal factors. This offset persistent pressures in non-food categories like housing and transport.
The State Bank of Pakistan cut its key policy rate by 50 basis points to 10.5% in December 2025. This move surprised markets, as analysts expected no change. The bank stated inflation remained within its 5-7% target range for July to November 2025.
In its monetary policy statement, the State Bank of Pakistan said: “The Committee noted that inflation on average remained within the target range of 5-7 percent during July-November FY26, though core inflation remains sticky and headline inflation could rise temporarily towards the end of this fiscal year due to base effects.”
The International Monetary Fund, under Pakistan’s USD 7 billion loan programme, cautioned against premature easing. Despite this, the inflation slowdown supports the bank’s decision.
Impact on South Asian Region
Pakistan CPI inflation in December 2025 at 5.6% YoY reflects broader regional trends of moderating prices. South Asia faces similar challenges from global commodity shifts. Pakistan’s slowdown could stabilise currency exchanges and boost exports to neighbours.
Remittances from Gulf countries, a key inflow for South Asia, benefit from lower domestic inflation. This aids household budgets in Pakistan and ripple effects in Bangladesh and Nepal through family ties.
Analysts view the inflation slowdown as positive for fiscal health. Government borrowing costs may decrease, freeing resources for infrastructure. However, sticky core inflation risks persistence if external shocks occur.
Background on Pakistan CPI Inflation
The Consumer Price Index tracks changes in prices of goods and services. Compiled by the Pakistan Bureau of Statistics, it covers urban and rural areas. Urban data spans 35 cities and 356 items; rural covers 27 centres and 244 items.
Pakistan CPI inflation peaked above 30% in 2023 amid currency devaluation and supply disruptions. Prudent policies reduced it steadily through 2024 and 2025. The 5.6% YoY in December 2025 marks continued progress.
Compared to December 2024’s 4.1%, the rise stems from base effects. Yet the month-on-month fall indicates cooling pressures. Food weights heavily in the index, making seasonal drops impactful.
Government measures, including subsidies on essentials, aided the slowdown. The finance ministry’s outlook highlighted base effects as a key driver for moderate inflation.
What’s Next for Pakistan CPI Inflation
The State Bank of Pakistan expects headline inflation to fluctuate due to base effects by fiscal year-end in June 2026. Core pressures warrant monitoring.
January 2026 data will show if the December 2025 inflation slowdown persists. Stable global oil prices could support further easing in Pakistan CPI inflation.
Published in SouthAsianDesk, January 2nd, 2026
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