ISLAMABAD: Pakistan’s inflation is likely to average 7.0-7.5% in the current fiscal year ending June 2027, lower than previously expected after oil prices retreated following an easing of the US-Iran war, with the country’s first interest rate cut of the year now likely in September, Topline Pakistan Research said on Monday.
The revised forecast brings inflation closer to the government’s target of 8.2% and below the International Monetary Fund’s projection of 8.4%, as easing global oil prices improve Pakistan’s inflation outlook after months of heightened regional tensions.
The brokerage expects the State Bank of Pakistan to leave its benchmark policy rate unchanged at its July 27 meeting before cutting it by 100 basis points in September.
“Our MoM [month-on-month] inflation for FY27 averages at 0.54% compared to last 2, and 5-years average MoM growth of 0.58%, and 1.20% respectively,” Topline Pakistan Research said in a note.
The brokerage revised its FY27 inflation forecast down by about one percentage point to 7.0-7.5%, from an earlier estimate of 8.0-8.5%, citing a sharp fall in Brent crude prices.
“The softening is on the back of likely resolution of war which has already lowered Brent oil prices by 39% to $71.8/barrel from peak of $118.35/barrel on Mar 31, 2026,” it said.
Topline said its forecast assumes Brent crude prices remain in the $70-$75 per barrel range, the Pakistani rupee depreciates by 5-6% during the fiscal year, gas prices rise by 15 percent in August before falling 5% in January, and electricity tariffs increase broadly in line with currency depreciation.
The brokerage also said food inflation was expected to remain contained despite seasonal spikes during Ramadan and Eid, while lower fuel prices would help moderate transport costs.
While the inflation outlook would justify an immediate easing in monetary policy, the brokerage said the central bank was likely to remain cautious in the ongoing month.
“In our view, there is a room for rate cut in Jul MPC [Monetary Policy Committee meeting] given the inflation pathway for next 12 months, however, we believe Central bank will observe status quo in Jul 2026” because of the fragile regional ceasefire and risks posed by the monsoon season to food production, it said.
Topline expects the State Bank to lower the policy rate by 100 basis points to 10.5% in September and by a further 50 basis points later in the fiscal year, taking the benchmark rate to 10.0% by end-FY27.
