Even before the war related inflationary pressures emerge, headline inflation in Pakistan clocked at 7 percent In February – 16 months high. CPI reading is only going to move up in the next 3-4 months due to unfavorable base effect and commodity prices – especially oil, surge due to worsening security situation in the Middle East. One must start internalizing that the interest rates are perhaps bottomed out in this cycle. And if oil prices persist to remain high, reversal in the direction can be a possibility. The 8MFY26 inflation is standing at 5.5 percent as compared to 5.9 percent in 8MFY25 and 28.0 percent in 8MFY24. For the past few quarters’ inflation has remained subdued and bottomed out a couple of months back. Now it’s moving up and may touch double digits in the last quarter of this fiscal year. MoM inflation increased by 0.3 percent, and due to low base effect, the yearly number inched to 7 percent from 5.8 percent last month. The stickiness of core inflation continued as it stood at 7.6 percent (urban 7.1% vs rural 8.3%). The rural inflation is consistently higher than urban and the trend continue. The headline inflation at 7 percent is slightly higher than the street consensus. The food index is down 0.9 percent MoM while the yearly increase stood at 5.8 percent. The decline is mainly in non-perishable sub-index – down by 0.4 percent on monthly basis. On the flip, Ramzan effect is visible in perishable food items – up by 2 percent in a month while there is still a dip of 2.5 percent on yearly basis. Tomatoes (23%) and fresh fruits (11.5%) demonstrate the biggest increase in food items followed by Pulse Mash (8.2%) and beverages (1.7%). On the flip, eggs (22.4%), chicken (20%) and potatoes (15.9%) are exhibiting a sharp month decline. The first two items have a seasonal fall while potatoes decline is attributed to absence of exports due to closure of Afghanistan border. Housing, water. electricity, gas and fuel sub-index,which has the second highest weight after food, is up by 1.9 percent over January 26 while the yearly increase came at 9.7 percent. The increase is mainly due to 10 percent monthly uptick in electricity charges, as fixed charges are being applied after ending the industrial consumers cross subsidy to certain domestic users. The respite comes from transportation index dipped by 1.9 percent MoM – mainly due to dip in transport services (read petroleum prices) by 10.4 percent in a month. However, the party seems to be over. Already, there is an uptick in petroleum prices for the first fifteen days of March, and outlook is bullish, due to closure of Strait of Hurmuz. If the prices remained up and tension in Middle East continues, there would have a negative impact on direct inflation and indirect (through possible currency adjustment). However, if the tension eases, and things become better, oil prices may remain higher than earlier expectations. Thus, overall inflation risks are growing, as both commodity prices and GDP growth are moving up, and that could have an adverse impact on balance of payment, and in turn on inflation. Even without these risks, next quarter inflation to hover around 8-10 percent. Copyright Business Recorder, 2026