Pakistan’s headline inflation is expected to climb to 7.2% year-on-year in February, marking the highest reading since July 2024, mainly due to a low base effect and seasonal price pressures during Ramadan, according to a report by Taurus Securities Limited.
The brokerage forecast a 0.5% month-on-month increase in the National Consumer Price Index (NCPI) for February. By comparison, inflation stood at just 1.52% year-on-year in February 2025.
Taurus said fiscal year 2026 to-date inflation is expected to average around 5.5% year-on-year, while its full-year base-case forecast stands at approximately 6.5%.
Food and utilities drive monthly increase
The report noted that perishable food items, which account for about 5% of the NCPI basket, are expected to post a sharp 10% month-on-month increase, driven by higher prices of vegetables and fruits during Ramadan.
In contrast, the non-perishable food segment, which has a 30% weight in the index, is likely to record a 1% month-on-month decline.
The utilities index, carrying a 24% weight, is projected to rise about 1% month-on-month due to higher household electricity charges. Meanwhile, the transport index, with a 6% weight, is expected to increase 1.4% month-on-month following a 2% rise in petrol prices and a 7% increase in diesel prices notified by the Oil and Gas Regulatory Authority (OGRA).
Core inflation is expected to post only muted gains, as seasonal demand pressures ease, the brokerage said.
Low base effect to persist
Looking ahead, Taurus Securities said the low-base effect is likely to keep inflation readings elevated through June 2026.
It warned that geopolitical volatility — particularly in global crude oil prices — adjustments in utility tariffs and supply-side pressures in food markets could keep inflation on the higher side, reducing the likelihood of a significant interest rate cut before the end of the current fiscal year.
The next monetary policy decision is scheduled for March 9 when the State Bank of Pakistan is set to review interest rates.
In its latest statement, the central bank said headline inflation eased to 5.6% year-on-year in December from 6.1% in November, reflecting moderation in food prices despite higher wheat-related costs. Energy inflation rose due to the fading impact of earlier electricity tariff reductions.
The central bank noted that core inflation has remained around 7.4% in the first half of FY26, though inflation expectations among consumers and businesses have continued to ease.
On balance, the State Bank projects inflation to remain within its 5% to 7% target range in FY26 and FY27, although it may temporarily exceed the upper bound in the coming months due to commodity price volatility, possible energy tariff adjustments and stronger-than-expected domestic demand.
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