Pakistan's inflation rate eased for a second straight month in July, offering a brief respite to households even as policymakers brace for renewed price pressures. Official data released Monday by the Pakistan Bureau of Statistics showed the Consumer Price Index (CPI) slowed to 9.2% last month, down from 11.07% in June, driven largely by a decline in transport costs. Main Developments The July slowdown was primarily attributed to a 5.24% month-on-month drop in transport charges, which had been lifted by earlier cuts in petrol and diesel prices. On an annual basis, transport costs still rose 15.08% compared with July last year, underscoring lingering pressure. Gas and fuel charges also saw a slight decrease from June, contributing to the overall easing. However, perishable food items spiked 17.69% from the previous month, while non-perishables rose 2.31%, keeping food inflation elevated and straining household budgets. Read also: Pakistan Sugar Mills Push for Export Permit to Ease Surplus Urban inflation stood at 8.7% year-on-year in July, slightly lower than the 9.9% recorded in rural areas. Month-on-month, urban prices increased 1.2%, with rural inflation matching that pace. Food inflation rose 9.6% in cities and 10.2% in rural regions, while non-food inflation reached 8.2% and 9.7%, respectively. Background The recent easing follows a period of higher price growth. In FY26, average inflation was recorded at 7.05%, up from 4.49% in FY25, despite a high base effect from the prior year. The government has set an inflation target of 8.2% for FY27, anticipating continued pressures. Fuel price adjustments have been a key lever. The government cut petrol and diesel prices in early July, providing relief, but has since begun raising them over the past two weeks. This reversal is expected to push inflation higher in the coming months. Why It Matters The slowdown, though modest, offers some cushion to consumers who have faced persistent cost-of-living increases. Yet the sharp rise in perishable food prices highlights ongoing volatility in essentials, which disproportionately affects lower-income households. Monetary policy remains cautious. The State Bank of Pakistan kept its policy rate unchanged at 11.50% in its latest review, citing rising oil prices amid renewed conflict in the Middle East. This suggests the central bank is wary of stoking inflation further. What's Next With fuel prices now climbing again, analysts expect July's relief to be short-lived. The government's FY27 target of 8.2% will be tested as energy costs feed through the economy. Core inflation, which excludes volatile food and energy components, stood at 8.6% in urban areas and 8.1% in rural areas in July. This measure will be closely watched for signs of underlying price momentum, which could influence future policy decisions.