Pakistan’s inflation set to hit two-year high in June as food prices surge; FY27 outlook eases

Pakistan’s inflation is expected to accelerate to its highest monthly level in two years in June 2026, driven largely by Eid-related food price pressures despite relief from lower fuel and electricity costs.

According to estimates, the Consumer Price Index (CPI) is projected to rise between 11.75% and 12.25% year-on-year in June, slightly above May’s 11.66% and sharply higher than 3.23% recorded in June last year. If realised, the reading would mark the third consecutive month of double-digit inflation and the highest monthly inflation print in 24 months.

The latest projection would take average inflation for FY26 to around 7.1%, up from 4.5% in FY25, indicating renewed price pressures after a period of relative moderation.

On a month-on-month basis, inflation is expected to increase by 0.46%, with food prices emerging as the principal driver. Food inflation is estimated to rise 1.22% during June, supported by seasonal demand associated with Eid festivities and sharp increases in key perishable items. Tomato prices are projected to jump 59%, onions 30%, and potatoes 20% over the month.

Some categories, however, provided offsetting relief. Transport inflation is expected to decline 2.47% month-on-month as international oil prices eased, bringing down petrol prices by 5.5% and high-speed diesel prices by 4.7%. Meanwhile, the housing, water, electricity and gas segment is projected to fall 0.5%, supported by lower LPG prices and reduced electricity charges following tariff adjustments.

The inflation outlook also has implications for monetary policy. With June inflation expected to move above prevailing interest rates, analysts estimate Pakistan’s real interest rate could turn negative by 25–75 basis points — below the country’s long-run historical average of 200–300 basis points.

Looking ahead, inflationary pressures are expected to ease again in the next fiscal year, with FY27 average inflation projected in the range of 8–8.5%, while June 2027 inflation is forecast at around 7%.