July–August 2025 Inflation Trends: What’s Driving Nepal’s Cost of Living?

Nepal’s overall cost of living rose moderately in the first month of FY 2025/26, as the Consumer Price Index (CPI) reached 104.96, a 1.68% increase compared to July–August 2024/25. Over a three-year horizon, the index rose by 4.09%, while compared to the previous month (June–July 2025), it climbed only 0.39%, showing that inflationary pressure, while present, is relatively contained. This reflects a delicate balance between easing food prices and steadily rising non-food and service costs.

The Food and Beverages group, which carries 35.49% weight in the CPI basket, fell by -2.28% year-on-year, offering some relief to households. The sharpest decline came from vegetables (-18.56%), supported by drops in spices (-4.81%)and meat & fish (-2.41%), all of which eased short-term consumer budgets. However, this relief was offset by strong gains in other essentials. Ghee and oil surged 10.97%, fruits rose 3.01%, and milk and eggs climbed 1.83%, keeping food-related inflation pressures alive. Cereals, a staple, continued to remain costly, recording a 9.15% rise over three years, even if slightly softer compared to last year.

The Non-food and Services group, which dominates the CPI with a 64.51% share, showed persistent inflationary momentum with a 3.95% year-on-year increase. Within this category, education costs soared 7.67%, reflecting structural inflation that directly impacts families. Clothes and footwear (+6.84%) and miscellaneous goods and services (+10.60%) further added to household burdens. On the other hand, housing and utilities (+1.02%), transportation (+3.94%), and health (+2.98%) showed moderate increases. Insurance and financial services offered marginal relief, declining by 0.22%.