October CPI Rises to 7.17% YoY, Driven by Food and Housing Costs

Staff Report:
The October CPI recorded a year-over-year inflation rate of 7.17%, surpassing our expectations. Month-over-month, inflation increased by 1.2%, primarily due to higher food and housing indices. The average CPI for the first four months of FY25 stands at 8.7%.

In October, the food index rose by 1.2% MoM, driven by significant price increases in wheat (up 6%), fresh vegetables (up 12%), and pulses (up 8%), while chicken prices decreased by 5%. The housing index saw a 1.6% MoM increase due to higher electricity rates (up 5%) and housing rent (up 1%), along with rises in water supply charges and construction wages.Shan Foods welcomes Tahir Malik as its first Global CEO

Conversely, the transport index declined by 1.5% MoM, attributed to lower fuel prices (down 2.3%) and transport service rates (down 2.1%). This decline reflects the government’s full pass-through of reduced international oil prices to local consumers.

Notably, urban core inflation decreased to 8.6% YoY, the lowest since its peak of 18.6% in November 2023, while rural core inflation fell to 11.7% YoY, down from 26.7% YoY in October 2023.

With inflation remaining elevated at 7.12% and the real interest rate at 10.38%, we believe the Monetary Policy Committee (MPC) has room to implement a 150 basis point rate cut in its upcoming meeting on Monday, November 4th.