Inflation seen slowing to 10.75pc in September

Pakistan anticipates a slowdown in inflation for September, despite the ongoing Gulf war creating high uncertainty. Financial analysts predict oil prices will remain between $90 and $100 per barrel during the month, though the situation has changed following US President Donald Trump's rejection of Iran's proposal for the conflict.

If the war resumes, analysts expect oil prices to stabilize around $100 per barrel, depending on international oil supply availability. Pakistan imports 70% of its energy needs, making it highly sensitive to oil price fluctuations. In August 2026, Pakistan's official inflation rate rose to 11.1% year-on-year from 9.2% in July. The Consumer Price Index (CPI) for September is forecasted to rise 10.25-10.75% year-on-year, slightly lower than the August figure but not indicative of a significant decline.

Pakistan's real interest rates are projected to be 75-125 basis points, much lower than its historical average of 200-300 basis points. However, electricity, housing, food, and construction costs have increased, potentially pushing inflation above analysts' expectations if the Gulf war persists. Meanwhile, Pakistan, Turkey, and Saudi Arabia are preparing for a potential conflict involving the Houthis and the kingdom, further compounding uncertainty over oil prices and supplies.

Pakistan's foreign exchange reserves, currently exceeding $21.4 billion, may provide some protection against higher oil import costs, but cannot prevent inflationary pressures from rising if the conflict continues and international energy prices remain high.