Pakistan's average inflation is expected to remain close to the government's target in fiscal year 2025-26, although headline consumer inflation is likely to accelerate sharply in June because of a low base effect, according to separate research reports by Arif Habib Ltd. and Optimus Capital Management Ltd.
June inflation to accelerate on low base
Arif Habib Ltd. projected headline inflation for June 2026 at 11.26% year over year, compared with 3.2% in the same month last year, largely reflecting the exceptionally low inflation recorded in June 2025 rather than a broad-based surge in monthly prices.
The brokerage expects average inflation to settle at 7.04% in FY26, broadly in line with the government's 7.1% target, compared with 4.6% recorded in the previous fiscal year.
It said June's annual inflation reading would be driven by higher prices across major expenditure groups, including food, housing, clothing and footwear, transport, education, health care, restaurants and hotels, and miscellaneous goods and services.
Monthly inflation expected to remain subdued
Despite the higher annual reading, Arif Habib Ltd. expects headline inflation to decline 0.12% month over month in June, mainly because of a 6.1% drop in transportation costs.
Food prices are expected to remain relatively contained, rising 0.3% from the previous month, supported by lower prices for chicken, fresh vegetables and pulses.
The brokerage forecasts non-food, non-energy (NFNE) core inflation at 8.7% year over year in June, up from 7.5% a year earlier, while average core inflation in FY26 is projected at 7.7%, down from 9.69% in the corresponding period last year.
Looking ahead, Arif Habib Ltd. said inflation should remain in the single-digit range during FY27, provided the Pakistani rupee remains stable, food and energy prices stay contained, and global commodity markets avoid significant volatility. It cautioned, however, that geopolitical tensions remain a key upside risk.
Optimus sees inflation flat month over month
Optimus Capital Management Ltd. projected National Consumer Price Index (NCPI) inflation at 11.5% year over year in June while remaining broadly flat on a monthly basis, saying lower energy prices are offsetting higher food costs.
The brokerage said easing geopolitical tensions have pushed international oil prices close to pre-conflict levels, allowing domestic petrol and diesel prices to fall by about 14.1% month over month. Consequently, it expects the transport index to decline 9.1% during June.
Housing costs are also forecast to fall for a third consecutive month, declining 0.8% month over month, supported by lower electricity tariffs and reduced liquefied hydrocarbon prices.
Food prices remain key inflation driver
Optimus Capital said food inflation remains the biggest source of price pressure, with the food index expected to rise 1.8% month over month.
The increase is primarily attributed to sharp increases in prices of perishable items, including potatoes, onions, tomatoes and fresh vegetables, while wheat prices are expected to rise only modestly despite reports of shortages in some cities.
The brokerage expects average inflation for calendar year 2026 to remain around 8%, provided global energy prices stay near current levels and food inflation is not disrupted by adverse weather conditions or climate-related shocks.
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