Pakistan’s headline inflation slowed to 3% year-on-year (YoY) in August 2025, according to data released by the Pakistan Bureau of Statistics (PBS). This marks a decline from 4.1% in July 2025, highlighting a cooling trend in consumer prices.

On a month-on-month (MoM) basis, inflation fell by 0.6% in August, compared to a sharp rise of 2.9% in July and a small increase of 0.4% in August 2024.

During the first two months of the fiscal year (July–August FY25), average CPI inflation stood at 3.53%, significantly lower than 10.36% recorded in the same period last year (2MFY24).

A Steady Decline from 2023 Peaks

Inflation has been a persistent challenge for Pakistan’s economy. In May 2023, the CPI had reached a record high of 38%, severely impacting households and businesses. However, since then, inflation has been consistently declining, offering some relief to consumers.

Interestingly, the latest CPI reading came in below government and market expectations.

• The Finance Ministry had projected inflation to remain in the range of 4-5% for August 2025.
• Brokerage houses, including Insight Securities, had also forecasted a 4.1% CPI for the month, expecting food price hikes to be offset by lower electricity charges and LPG prices.

Urban vs Rural Inflation

The PBS data also highlighted differences between urban and rural inflation:

• Urban Inflation: Rose 3.4% YoY in August (down from 4.4% in July and 11.7% in August 2024). On a monthly basis, it dropped by 0.7%.
• Rural Inflation: Increased 2.4% YoY in August (compared to 3.5% in July and 6.7% in August 2024). Month-on-month, it fell by 0.5%.

Outlook

The sharp fall in inflation to 3% is encouraging, but experts caution that risks remain. Any fluctuations in global oil prices, energy adjustments, or food supply shocks could once again put upward pressure on inflation in the coming months.