Pakistan’s inflation is expected to accelerate sharply in May 2026, with the Consumer Price Index (CPI) projected to rise to 11.0–11.5% year-on-year, compared to 10.89% in April 2026 and 3.46% in May 2025. This would mark the highest inflation reading in nearly two years.

On a month-on-month basis, inflation is estimated at 0.07%, mainly driven by a 1.2% increase in food prices.

Food inflation is being led by steep rises in essential commodities, including wheat flour, which is up 9.47% month-on-month, wheat at 5.52%, and potatoes at 5.24%. These increases were partially offset by declines in tomato prices, which fell about 28%, and onion prices, down nearly 13%.

The transport segment showed a slight overall decline in prices following earlier volatility linked to international oil markets amid geopolitical tensions involving Iran, the United States, and Israel. Within the category, petrol prices rose by 5.6%, while high-speed diesel recorded a sharp 23.1% drop.

The housing, water, electricity, and gas segment is expected to decline by 0.79% month-on-month in May 2026, largely due to lower liquefied petroleum gas (LPG) prices, which fell nearly 4%, and a 3.8% reduction in electricity charges.

Electricity costs eased due to a negative Fuel Charges Adjustment of Rs0.0102 per kWh, compared to Rs1.6406 per kWh in April 2026, along with a quarterly tariff adjustment of Rs0.3504 per kWh.

With inflation projected in the 11.0–11.5% range, real interest rates are expected to remain between 0–50 basis points, below Pakistan’s historical average of 200–300 basis points.

According to Topline Research, average inflation for FY2026 is forecast at 7.1%, while FY2027 inflation is projected at 8.2%.