Pakistan’s Inflation Rate: Understanding the CPI and Its Impact

Inflation is a key indicator of economic health, and in Pakistan, the Consumer Price Index (CPI) is the main tool used to measure it. The CPI tracks the average change in prices of goods and services over time, directly affecting purchasing power and business decisions.

A rising CPI means consumers pay more for essentials like food, fuel, and electricity while savings and fixed incomes lose value. For businesses, inflation affects input costs, profit margins, and pricing strategies. For investors, it impacts interest rates and currency strength.

Understanding CPI trends helps businesses anticipate cost pressures and adjust their strategies. For instance, an upward trend in inflation may signal higher future interest rates, influencing borrowing decisions or portfolio allocations.

In FY25, Pakistan’s inflation averaged 4.49%, a significant drop from 23.41% in FY24 attributed to better fiscal management, stable energy prices, and a stronger rupee.

So, CPI is more than just a number, it’s a powerful signal that shapes economic policies, investment strategies, and day-to-day financial decisions.