Inflation Surges to 16-Month High at 7% in February

Pakistan’s inflation climbed to 7% in February 2026, marking the highest level since October 2024, as higher electricity prices and rising global uncertainty pushed up living costs.

According to the Pakistan Bureau of Statistics, the Consumer Price Index (CPI) rose 6.98% year-on-year, compared with 5.8% in January and 1.5% in February last year.

Electricity Prices Drive Increase

The sharpest impact came from electricity tariffs after subsidy cuts and the removal of cross-subsidies. The housing, water, electricity, gas and fuels category rose 9.65% annually and 1.86% month-on-month. Electricity prices alone jumped 10.03% from January.

Core inflation, which excludes food and energy, eased slightly in urban areas to 7.1% from 7.2%, and remained stable in rural areas at 8.3%.

Policy Rate and Wholesale Prices

The rise in inflation narrowed real interest rates by 120 basis points. The State Bank of Pakistan kept its policy rate unchanged at 10.5% last month. The eight-month average inflation for fiscal year 2026 stands at 5.46%, within the government’s 6–7% forecast range.

Meanwhile, the Wholesale Price Index (WPI) rose to 1.0% in February, up from 0.2% in January, indicating growing cost pressures at the producer level. Analysts warn that higher wholesale prices could feed into retail inflation in the coming months.

Food Prices Mixed

Food and non-alcoholic beverages inflation increased to 5.8% from 3.9% in January. Some essential items recorded sharp annual increases:

• Tomatoes up 82%

• Wheat up 42.6%

• Wheat flour up 25.9%

• Butter up 16%

• Fresh fruits up 13%

Meat, milk powder, rice, and eggs also saw notable increases.

However, some items declined, helping to ease overall food inflation. Potato prices dropped 40%, chicken fell 21.8%, gram pulse declined 21.7%, and onions decreased 17%.

Non-Food Price Pressures

In the non-food segment, gas charges rose 22.9%, postal services 12.6%, newspapers 11.9%, liquefied hydrocarbons 11.6%, and education costs 8.78%. Miscellaneous goods and services inflation climbed to 23% from 20.97%.

Outlook

Analysts say domestic energy reforms combined with Middle East tensions could further raise oil import costs, weaken the rupee, and push inflation higher. With millions of Pakistanis working in Gulf countries, any regional escalation could also affect remittances, adding economic pressure at home.