The reading marks a slight uptick from 5.6% in December 2025 but remains well above the 2.4% recorded in January last year.

On a month-on-month basis, the Consumer Price Index (CPI) rose by 0.4% in January, reversing a 0.4% decline in December and compared with a 0.2% increase in January 2025.

Average inflation for the first seven months of FY26 came in at 5.24%, down from 6.50% in the same period last year.

Urban inflation remained steady at 5.8% year-on-year in January, compared with 2.7% a year earlier. On a monthly basis, urban CPI edged up 0.2%, following a 0.4% fall in December.

Rural inflation rose to 5.8% year-on-year, up from 5.4% in the previous month and 1.9% in January 2025. Month-on-month, rural prices increased by 0.6%, after a 0.6% decline in December.

In its Monthly Economic Update and Outlook for January 2026, the Finance Division had projected inflation to remain within the 5-6% range.

Last week, the State Bank of Pakistan (SBP) kept its benchmark policy rate unchanged at 10.5% in its first Monetary Policy Committee meeting of the year, defying market expectations of a rate cut.

SBP Governor Jameel Ahmad said inflation could rise above 7% in the second half of the current fiscal year. He also projected gross domestic product growth of 3.75% to 4.75% for FY26.