Pakistan's headline inflation is set to slip below 10% in July for the first time in three months, but analysts warn the relief is largely a statistical illusion. Favourable base effects—not a genuine slowdown in price momentum—are driving the expected decline, while underlying costs for food and core items continue to climb. Main Developments Headline consumer price inflation (CPI) for July is projected at 9%–9.3% year-on-year, down from 11.1% in June, according to estimates from Ismail Iqbal Securities and JS Global. The brokerage firms attribute the drop primarily to base effects—a comparison with high inflation from a year earlier—rather than any easing of underlying price pressures. On a monthly basis, Ismail Iqbal Securities expects CPI to rise 1.3%, driven almost entirely by food costs. The food index is forecast to jump 4% month-on-month, led by tomatoes, potatoes, onions, fresh vegetables, chicken, and eggs. Wheat and wheat flour are projected to increase around 5.7% month-on-month. Read also: Why Pakistan's PSDP overshoot signals deeper fiscal strain Offsetting some of the food-driven monthly rise, transport costs are expected to fall 3.4% month-on-month on the back of a 7.4% decline in motor fuel prices. Housing costs are seen easing 0.4% due to lower electricity and LPG charges. Background Pakistan's headline inflation has remained in double digits for three consecutive months—June recorded 11.1%—after a period of relative moderation earlier in the year. The return to single-digit readings in July is largely a statistical artifact: the base period from July 2025 had unusually high inflation, making the year-on-year comparison look lower. Core inflation, which excludes volatile food and energy items, tells a more stubborn story. Ismail Iqbal Securities expects non-food, non-energy (NFNE) core inflation to edge up to 8.5% year-on-year in July from 8.4% in June and 7.6% in the same period last year. This signals that "the headline relief is coming from fuel and perishable food, both volatile, while underlying price pressures remain intact," the brokerage noted. Why It Matters The expected single-digit inflation reading may offer temporary political and psychological relief for Pakistani consumers and policymakers, but it does not signal a durable easing of cost-of-living pressures. Food prices—the most immediate concern for households—continue to rise sharply on a monthly basis, while core inflation remains sticky. JS Global projects transport inflation will surge 21% year-on-year in July, driven by Middle East tensions and global energy market volatility. Food inflation is also expected to stay elevated at 9.1% year-on-year, with housing at 8.4% and miscellaneous items climbing 11.3%. These persistent pressures complicate the central bank's monetary policy decisions, as it balances growth support against inflation control. What's Next Analysts will watch upcoming monthly CPI data closely to determine whether July's single-digit reading is a one-off base effect or the start of a genuine disinflation trend. The trajectory of global energy prices, Middle East geopolitical developments, and domestic food supply conditions will be key factors shaping inflation in the months ahead. The State Bank of Pakistan, which recently held its policy rate steady citing Middle East risks, faces continued pressure to manage inflation expectations without stifling economic activity. Markets will look for signals in the next monetary policy meeting about whether the central bank sees room for easing in the coming quarters.