Nepal's Inflation Falls to 2.72% in Mid-June 2025, Lowest in Five Years

Nepal's consumer inflation rate has shown a significant decline, reaching a five-year low of 2.72% year-on-year (y-o-y)by mid-June 2025, according to data released by Nepal Rastra Bank. This marks a sharp drop from 4.17% recorded in mid-June 2024 and a substantial decrease from 3.57% observed in the annual average for FY 2023/24.

The broader trend over the past few years reveals a fluctuating inflation pattern. In FY 2019/20, the Consumer Price Index (CPI) stood at 4.78%, which slightly decreased to 4.19% in FY 2020/21. However, inflation surged to 8.08% in FY 2021/22—driven by post-pandemic supply chain disruptions and global commodity price shocks—before easing to 7.44% in FY 2022/23. The trend sharply reversed in FY 2023/24, with the annual CPI falling to 3.57%, suggesting a return to monetary stability.

The continued drop in inflation through mid-June 2025 signals a more stable macroeconomic environment. Factors contributing to this trend include improved domestic production, easing import costs due to stronger currency reserves, and tighter monetary policy by the central bank.

This low inflation figure is particularly important as it provides relief to households facing high living costs in previous years and supports purchasing power recovery. However, policymakers must remain cautious to ensure inflation remains within a healthy range that supports both consumer welfare and sustainable economic growth.