Inflation seen slowing to 10.75pc in September

Dawn reported that some stakeholders and analysts expect Pakistan's inflation to ease in September, despite high uncertainty tied to the ongoing Gulf war. A Topline Securities report projects the consumer price index for September at 10.25 to 10.75 per cent year-on-year, down from 11.1 per cent in August. The report notes that the expected dip is slight rather than significant.

The outlook has grown less clear after US President Donald Trump said he had rejected an Iranian proposal for the Gulf war, fuelling worries that crude could climb. Analysts see oil near $100 per barrel if fighting resumes, and petroleum prices in Pakistan have been rising daily, with an increase of over 50 per cent against 10 per cent in India. Electricity, housing, food and construction costs have also climbed, which could push inflation above forecasts.

Pakistan imports 70 per cent of its oil and gas requirements, which makes inflation highly sensitive to oil prices. Foreign exchange reserves above $21.4 billion may cushion costlier imports, but they cannot hold back inflationary pressure if the conflict persists. Topline expects real interest rates to be 75 to 125 basis points, below Pakistan's historical average of 200 to 300 basis points.