Pakistan inflation likely to ease modestly as oil price outlook stays volatile

Pakistan's inflation is projected to decelerate modestly in September, according to a Topline Securities analysis, even as the country grapples with high sensitivity to oil price swings. The financial community expects crude to remain in a high price band for the remainder of the month and into October, a situation complicated by recent statements from Donald Trump rejecting Iran's peace overture and the potential for renewed US action.

Analysts caution that any escalation could lift oil prices further, sustaining upward pressure on consumer prices. While the slowdown is modest, real interest rates are expected to stay well below historical averages. Increases in electricity, housing, food and construction costs could offset the modest easing, especially if the Gulf conflict drags on. Pakistan's foreign exchange reserves provide some buffer, but cannot fully shield the economy from higher import costs.