By Staff Reporter
ISLAMABAD: Consumer prices in Pakistan climbed more than economists had projected in August, complicating the central bank’s next policy move as tensions in the Middle East raise the risk of further cost pressure ahead.
The consumer price index rose 11.1% from a year earlier, according to Pakistan Bureau of Statistics data released on Tuesday, outpacing a Bloomberg survey median of 10.9%. The reading marks a sharp acceleration from July’s 9.2% and stands in stark contrast to the 3.1% pace recorded in August 2025.
The surprise comes after two straight months of cooling inflation had fueled expectations that the State Bank of Pakistan’s rate-cutting cycle could continue with little resistance. Some pickup was anticipated given how depressed year-earlier prices were, but the magnitude of August’s jump — more than triple the year-ago rate — signals that imported energy costs and food prices are reasserting themselves faster than policymakers had banked on.
Monthly price growth held steady at 1.2%, matching July’s pace and marking a reversal from the 0.6% monthly decline logged in August 2025.
Price pressure was more pronounced outside the cities. Rural inflation reached 12.2% on an annual basis, up from 9.9% in July and more than four times the 2.5% rate recorded a year earlier. Urban inflation came in at 10.4%, rising from 8.7% the previous month and well above August 2025’s 3.5%. The monthly gap between the two also widened: rural prices climbed 1.6% versus 1.2% in July, while urban prices rose a more modest 0.9%, down from 1.2%.
Averaged across the first two months of the fiscal year, headline inflation now runs at 10.17%, versus 3.53% over the same stretch last year — a gap that shows how quickly the disinflation narrative of recent months has come under strain.
Wholesale prices jump, sensitive-item gauge eases
Underlying price gauges sent conflicting signals. The Wholesale Price Index surged 11.8% year-on-year, reversing a 1.0% contraction posted in August 2025 and accelerating from 9.4% growth in July; on a monthly basis it rose 2.0%, having been flat the month before.
The Sensitive Price Index, a narrower measure of fast-moving essentials that often serves as an early read on household cost pressure, moved the other way. It rose 9.5% annually, down from 12.0% in July, though still nearly four times the 2.6% pace from a year earlier. The monthly SPI reading slowed to 0.9% from 2.4% in July, suggesting some relief in the most immediate, day-to-day price pressures even as the broader inflation picture worsened.
Core inflation — the Non-Food Non-Energy measure the central bank leans on most heavily in setting policy — also moved higher. The urban reading rose to 8.8% from 8.6% in July, while the rural equivalent climbed to 8.5% from 8.1%. A separate 20% trimmed-mean core measure showed a steeper rise: the urban gauge jumped to 8.9% from 7.5%, and the rural gauge advanced to 9.1% from 8.0%.
Government had flagged the risk
The finance ministry’s economic survey for August, published shortly before Tuesday’s release, had already signaled trouble, projecting inflation would land between 10% and 11% for the month on the back of global commodity and energy price pressures. The actual print came in above even that upper bound.
Officials pointed to geopolitical instability and volatile global energy markets as the chief threats to both the inflation trajectory and the external account, arguing that keeping a tight rein on fiscal policy and pressing ahead with structural reforms would be essential to protect the stabilization Pakistan has achieved and to carry growth momentum into the 2027 fiscal year.
Tuesday’s numbers give that warning some teeth. With fighting in the Middle East threatening to keep energy and freight costs elevated well into the new fiscal year, the central bank now faces a tighter balancing act between nursing the economic recovery along and stamping out a fresh bout of inflation — a tension likely to dominate discussion when the Monetary Policy Committee next meets.
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