The Sensitive Price Indicator (SPI), a key short-term inflation gauge, recorded a week-on-week decline of 0.39% for the week ending January 16, 2025, but year-on-year the reading was up 1.16%.

The fall in the inflation rate compared to the previous week was primarily driven by falls in the prices of key food items, including tomatoes, potatoes, onions and eggs.

The SPI reading for the week under review fell to 322.71 points compared to 323.97 in the previous week. At the same time last year, the index stood at 319 points.

Significant week-to-week price reductions were observed for key commodities including tomatoes (18.31%), potatoes (10.42%), onions (10.01%), eggs (8.64%), chicken (2, 17%), liquefied petroleum gas (1.21%) %), pulse mash (0.81%), mustard oil (0.67%) and garlic (0.54%).

Conversely, prices of several items increased which included bananas (3.22%), petrol (1.39%), vegetable ghee (1.08%), cooking oil (1.01%), firewood (1%), diesel ( 0.99%) and pulse moong (0.89%). Other commodities that saw price increase were sugar (0.72%), boiled daal (0.59%) and Basmati rice (0.58%).

Out of the 51 items monitored by the SPI, 21 items (41.18%) recorded a price increase, 10 items (19.61%) had a decrease and 20 items (39.21%) remained stable.

For the weekly SPI, price data is collected from 17 urban centers for all expenditure groups. For the lowest consumption group up to Rs 17,732 per month SPI fell 0.62% to 314.75 points. Other consumption groups also showed a decrease.

For the group in the range of Rs17,732 to Rs22,888, the SPI decreased by 0.56%, for consumption of Rs22,889 to Rs29,517 it decreased by 0.46%, for consumption ranging from Rs29,518 to Rs44,175, the SPI decreased by 0 .43% and for the group above Rs.44,175. the reading fell 0.31%.

Year-on-year, the SPI reflected an overall increase of 1.16%. Significant price increases were noted for ladies sandals (75.09%), potatoes (47.91%) and pulse gram (39.77%). However, steep declines were recorded in the prices of onions (47.22%), wheat flour (35.89%) and eggs (31.92%).

Topline Securities Director Research Shankar Talreja predicted that Pakistan’s Consumer Price Index (CPI) for January would be between 2.5% and 3% year-on-year, the lowest in nine years. This will bring average inflation for 7MFY25 to 6.66%, down significantly from 28.73% in the same period last year.

With inflation expectations of 2.5-3% for January, real interest rates are expected to rise to 1,000-1,050 basis points (bps), far exceeding Pakistan’s historical average of 200-300 bps.

Talreja predicted a rate cut of 100bps to 12% at the central bank’s monetary policy meeting on January 27, and rates were expected to remain between 11% and 12% by the end of the year.