CPI Preview: May inflation to clock in at 11.88%

June 01, 2026 (MLN): Mettis Global’s latest read on inflation arrives at a point where the macro narrative feels less like a transition and more like a collision of forces that are pulling prices in different directions at the same time.

Headline CPI is estimated at 11.88% YoY for May 2026, rising sharply from 10.90% in April, yet still anchored to an even more important reference point—the unusually soft 3.50% print in May 2025, which has now fully matured into a powerful base effect driving the current inflation optics.

Brokerage consensus is only slightly higher, at 12.05%, with forecasts ranging from 11.50% (Sherman Securities) to 12.40% (Taurus Securities). Including Mettis Global, the blended average across 10 research houses settles at 11.93%, reinforcing how tightly the market is converging around the 12% zone rather than drifting away from it.

On a cumulative basis, 11MFY26 average inflation is projected at 6.7% YoY, compared to 4.7% in the same period last year, a clear signal that the disinflation phase that defined FY25 has effectively ended, giving way to a more rigid inflation regime.

What makes May’s inflation story more complex is not just the level itself, but the simultaneous pull of multiple price drivers. While they are often grouped conceptually, this reading is shaped by four distinct and interacting forces:

1. Food prices

Eid-driven demand, combined with supply-side frictions, pushed food inflation higher across both perishables and staples. Seasonal normalization is underway, but uneven and slow, keeping upward pressure intact.

2. Fuel and transport

Global energy markets added another layer of pressure, with WTI, Brent, and Arab Light all posting modest monthly gains. Geopolitical tensions around the Strait of Hormuz further amplified volatility, feeding directly into domestic MS and HSD adjustments and lifting transport costs.

3. Base effect

The 3.50% inflation print in May 2025 continues to distort year-on-year comparisons. Even modest monthly price changes are translating into elevated YoY readings, making the current inflation profile appear stickier than sequential momentum alone would suggest.

4. Currency

PKR stability has supported real incomes and consumption demand, but it has also removed a key disinflation buffer. Unlike previous cycles, currency is no longer acting as a shock absorber against imported inflation—it is neutral at best, mildly pro-demand at worst.

Where each house stands and why

Why brokers disagree by 90 bps

The 90 bps gap between Taurus (12.40%) and Sherman (11.50%) reflects genuine uncertainty around two variables: (1) how much of the Eid food demand spike persists post-holiday, and (2) how quickly the crude oil shock transmits through domestic pump pricing into transportation costs. 

Interest Rates

The SBP's MPC raised the policy rate by 100 bps to 11.50% on 27 April 2026, pivoting decisively toward tightening. The MPC explicitly flagged that supply shocks from the prolonged Middle East conflict risk pushing inflation into sustained double digits, with headline CPI expected to remain above the 5-7% target range for most of FY27.

A May print around 11.88-12.05% validates that concern and raises the probability of another hike at the June MPC meeting.

What could move the needle

 The inflation outlook remains tethered to geopolitics. If the Iran-US conflict de-escalates, commodity prices normalise, and domestic food supply improves, the trajectory could reverse meaningfully.

Until then, Pakistan is experiencing structurally elevated inflation, and markets, policymakers, and consumers should plan accordingly.

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