August Inflation Update: Nepal Records Lowest CPI Growth in Four Years

Nepal’s mid-month CPI data for August 2025/26 shows that the country recorded its lowest inflation growth in four years, with the index rising just 1.68% year-on-year. The CPI reached 104.96, up from 103.22 in August 2024/25. This marks a sharp slowdown compared to previous years when inflation was 4.09% in 2024/25, 7.52% in 2023/24, and as high as 8.26% in 2022/23.

This consistent decline highlights a broader cooling inflation trend in Nepal. In 2022/23, households faced high cost pressures due to food shortages, fuel price hikes, and global supply chain disruptions. By 2023/24, inflation had eased but remained elevated at 7.52%, largely because of non-food inflation in housing, education, and healthcare. In 2024/25, inflation slowed further to 4.09% as food prices stabilized and global energy costs softened.

Now, in 2025/26, the CPI shows a dramatic moderation. Food prices have either stabilized or declined, especially in cereals, vegetables, and seasonal produce, offering relief to households. However, the non-food and services sector continues to show upward movement, meaning that while groceries are cheaper, families are still spending more on rent, utilities, health, and education. This reflects Nepal’s structural shift from food-driven inflation toward service-driven inflation, which may persist in the long run.

For consumers, this is both good and challenging news: basic food affordability has improved, but rising service costs still weigh on household budgets. For policymakers, the slowdown reflects successful inflation control measures but also signals the need to focus on structural issues in service costs.