Pakistan’s inflation to clock in at 7.4% in February, highest in 18 months: report

Pakistan’s inflation is set to edge higher in February 2026, with expectations of 7.4% YoY, reflecting pressures from rising electricity and gold prices, said Optimus Capital Management, a brokerage house, in a report on Friday.

“We expect headline NCPI to rise 0.7% MoM in Feb-26, taking annual inflation to 7.4% YoY, up from 5.8% YoY in the previous month and the highest in around 18 months,” read the report.

“The uptick marks the beginning of a base effect-driven acceleration phase, compounded by electricity tariff adjustments and rising gold prices.

“The food index is expected to ease 0.4% MoM, offsetting some pressure. Core inflation is likely to edge higher to 7.9% YoY, reversing from a recent low of 7.2% in Aug-25,” it added.

Inflation in Pakistan has been a significant and persistent economic challenge, particularly in recent years. In May 2023, the Consumer Price Index (CPI) inflation rate hit a record high of 38%.

Following the peak, inflation showed a substantial and steady decline, dropping into single digits by September 2024 (6.9%) and reaching its lowest point at 0.3% in April 2025. Since the low point, the inflation rate has begun to climb again, indicating a recent acceleration in the cost of living.

In January 2026, Pakistan’s headline inflation clocked in at 5.8% on a year-on-year (YoY) basis.

Optimus Capital said it expects headline CPI to trend higher through FY26, with base effects likely pushing inflation near 9-10% YoY by June 2026, and with the strongest MoM print in March 2026.

“This is driven by 1) Ramadan demand seasonality, 2) higher crude oil prices in Feb-26 amid geopolitical tension, and 3) positive FCA electricity charges.

“Continued PKR stability and still relatively softer global oil prices remain key offsets. We estimate FY26 average inflation at 6.7% YoY, within SBP’s 5 - 7% target, implying a 12M forward real rate of ~2.6% in Feb-26E.”