Kathmandu Valley Inflation Hits 2.26%: Food Prices Fall, Services Surge Nearly 4%

The latest Consumer Price Index (CPI) data for July–August 2025/26 shows that Kathmandu Valley’s overall inflation rose by 2.26% year-on-year, climbing from 102.61 in the same month of the previous year to 104.93. On a month-to-month basis, inflation also increased by 0.70% compared to June–July 2025, confirming that the capital region continues to face rising living costs despite cheaper food prices.

A closer look reveals a clear divergence between food and non-food components. The Food and Beverage category (27.21% weight) registered a -2.10% decline year-on-year, dropping from 105.22 to 103.02. This indicates that food prices have eased, particularly in vegetables, cereals, and some seasonal agricultural items, providing partial relief for households. However, this decline in food costs was not enough to counter the upward momentum from services and non-food expenses.

The Non-food and Services category (72.79% weight) emerged as the key driver of inflation, with prices surging 3.95% year-on-year, from 101.63 to 105.64. Rising expenses in housing rents, utilities, health, education, and personal services have pushed up the cost of living, especially for urban families who rely heavily on such services. The sharp increase highlights that Kathmandu Valley’s inflation is shifting away from being food-driven to being structurally service-driven.

Overall, the data suggests that while Kathmandu households may experience some breathing space in food spending, this benefit is quickly eroded by rising service costs, making daily life more expensive. Policymakers may need to address structural inflation in urban services to protect household purchasing power in the Valley.