August inflation seen jumping to 11%

Pakistan's headline inflation is expected to accelerate to 11.0% year-on-year in August 2026, driven primarily by higher food prices and increased petroleum costs.

The National Consumer Price Index (NCPI) is projected to rise 1.0% month-on-month (MoM) in August, compared with a 0.6% MoM decline in August 2025. On a yearly basis, the expected 11.0% increase would be substantially higher than the 3.0% recorded in the same month last year.

In a forecast report, Growth Securities said the projected August inflation rate exceeds the government's 8.2% average target for FY2027, reflecting renewed price pressures at the beginning of the fiscal year. The brokerage attributed the monthly uptick mainly to food prices, amplified by increases in petrol and high-speed diesel (HSD).

The food index is estimated to rise about 0.7% MoM, largely due to seasonal increases in essential commodities. Wheat prices are estimated to have risen around 3% during the month, chicken by 9% and pulse gram by 8%. Onion prices recorded the sharpest jump, surging about 68% MoM.

These movements underscore the role of seasonal factors in food inflation, which could push up the headline CPI despite some moderation in other components. The broad-based increase across essential items suggests the spike is not confined to a single commodity, with supply pressures likely to keep food inflation elevated in the near term.

The transport index is also expected to contribute, with a projected 0.3–0.4% MoM rise following increases in domestic fuel prices. Average petrol prices rose 7.6% to Rs339.33 per litre, while HSD increased 6.7% to Rs364.90 per litre. Higher fuel costs are expected to feed directly into transport and indirectly into goods and services through elevated logistics costs.

The housing component may offer partial relief. Growth Securities expects the housing index to decline MoM, mainly due to a 7.3% reduction in electricity charges. However, LPG prices rose 1.2% MoM, adding a modest 0.01 percentage points to headline CPI.

Looking ahead, inflationary pressures are expected to remain elevated in the near term before easing. CPI is projected at 9–10% in September and October, with FY2027 average inflation seen at 8–9%.

The outlook has implications for monetary policy. Real interest rates turned positive in June and July and are expected to reach around 0.5% in August. With inflation likely to moderate after the August peak, the State Bank of Pakistan's Monetary Policy Committee is expected to maintain its stance, keeping the policy rate unchanged at 11.5% at its September 14, 2026 meeting.

While August may mark a renewed acceleration in prices, the broader FY2027 trajectory is expected to be more moderate, though still above the government's 8.2% target, warranting caution on policy easing.