ISLAMABAD – Pakistan’s headline inflation soared to 3.5 percent year-on-year in May 2025, up from 0.3pc recorded in April, higher than market forecasts, raising fresh concerns about inflationary pressures resurfacing despite recent policy easing.
Data shared by Pakistan Bureau of Statistics (PBS) shows consumer prices moved down by 0.2pc in May, a smaller drop compared to the 0.8pc decline seen in April. In contrast, May 2024 had recorded a significant monthly drop of 3.2pc.
The average inflation for the first 11 months of Fiscal Year24-25 hovers at 4.61pc, a considerable improvement from 24.52% average recorded during the same period last year. This trend reflects a consistent decline from the inflation peak of 38% in May 2023.
Amid easing inflation earlier this year, State Bank slashed key interest rate by 100 BPS, bringing policy rate down to 11pc — its lowest level since March 2022. Since June 2023, the central bank has slashed rates by a total of 1,100 basis points from a record high of 22pc.
Despite these measures, May inflation reading surpassed government projections. Finance Ministry had anticipated year-on-year inflation to remain between 1.5pc and 2pc in May, with gradual rise to 3-4pc in June.
Meanwhile, Urban inflation soared to 3.5pc year-on-year in May, up from 0.5pc in April and 14.3pc in May 2024. In rural areas, annual inflation rose to 3.4% in May, reversing a 0.1% decline in April and compared to 8.2% in May 2024. Month-on-month, rural inflation declined by 0.5%, following a 1.0% drop in April.
