Nepal CPI Mid-Month Report: Regional Gaps in Food and Non-Food Inflation Explained

The mid-month CPI data for July–August 2025/26 shows Nepal’s overall inflation at 1.68% year-on-year, but a deeper dive into the ecological belts reveals sharp regional differences between food and non-food inflation. While food prices have generally declined across all regions, the non-food and services category has surged, becoming the main driver of living costs. This split highlights a structural shift in Nepal’s inflation, moving away from food-driven patterns toward service-driven inflation.

In Kathmandu Valley, overall inflation hit 2.26%, fueled by a 3.95% rise in non-food and services despite a -2.10% drop in food prices. Urban households in the capital are spending less on groceries but much more on housing, health, utilities, and education, making services the dominant inflation driver.

The Terai region recorded the lowest overall inflation at 1.33%, with food costs plunging -3.03%. However, this was offset by a sharp 4.17% rise in non-food inflation, making service-related costs the primary source of financial strain for families in semi-urban areas.

The Hill region experienced 1.56% inflation, with food prices easing by -1.51% but non-food costs climbing 3.31%. This suggests that even rural households are increasingly feeling the impact of service inflation, especially in education and health, where demand is steadily rising.

The Mountain belt recorded the highest inflation at 2.59%, despite food prices dropping -1.15%. Non-food and services soared 5.06%, the steepest rise among all belts, reflecting the higher costs of logistics, transport, and essential services in geographically remote areas.