Pakistan’s inflation is expected to rise sharply in May 2026, reaching its highest level in nearly two years, according to latest market projections.
The Consumer Price Index (CPI) is estimated to come in at 11.0% to 11.5% year-on-year, compared to 10.89% in April 2026 and just 3.46% in May 2025. This would mark the highest inflation reading in 23 months, reflecting renewed price pressures in key sectors of the economy.
On a month-on-month basis, inflation is projected at 0.07%, with increases mainly driven by a 1.2% rise in food prices.
Food inflation is expected to be led by sharp increases in essential commodities, including wheat flour, which rose 9.47% month-on-month, wheat up 5.52%, and potatoes up 5.24%. However, this upward pressure was partly offset by declines in tomato prices of around 28% and onion prices of nearly 13%.
The transport sector recorded a slight overall decline despite volatility in global oil markets. Within the category, petrol prices increased by 5.6%, while high-speed diesel prices fell by 23.1%, reflecting global and domestic pricing adjustments.
Meanwhile, the housing, water, electricity, and gas category is expected to decline by 0.79% month-on-month, largely due to lower liquefied petroleum gas (LPG) prices and reduced electricity charges.
Electricity costs fell following a sharp drop in fuel charges adjustment and quarterly tariff revisions, providing some relief to consumers.
Despite these partial offsets, overall inflation remains on an upward trajectory. Analysts say the projected inflation range of 11.0% to 11.5% could push real interest rates to between 0 and 50 basis points, significantly below Pakistan’s long-term average.
Economic experts note that while inflation is still below historic highs, the recent uptick highlights persistent volatility in food and energy markets, keeping pressure on household budgets and monetary policy decisions.
Forecasts suggest average inflation could stabilize at 7.1% for FY2026, rising further to 8.2% in FY2027, indicating a gradual but uneven inflation outlook ahead.
