Inflation in Nepal: Latest Mid-March 2026 Update
Nepal's inflation has been rising steadily in the first eight months of fiscal year 2025/26. According to the latest data from the Nepal Rastra Bank (NRB), the Consumer Price Index (CPI) based year-on-year inflation reached 3.62% in mid-March 2026 — the highest reading of the current fiscal year.
Headline Inflation: 3.62% in Mid-March 2026
The mid-March 2026 inflation rate of 3.62% marks a significant acceleration from just four months ago, when it was 1.11% in mid-November 2025. The eight-month average for FY 2025/26 stands at 2.13%.
This rise is primarily attributed to:
- Seasonal demand increases (approaching festival season)
- Food price pressures, especially vegetables and grains
- Higher transportation and energy costs
- Stronger consumer demand as the economy improves
Historical Context
To put Nepal's current inflation in perspective:
- FY 2024/25 annual average: approximately 4.5% (NRB data)
- FY 2025/26 8-month average: 2.13%
- Current reading (mid-Mar 2026): 3.62%
Despite the recent rise, Nepal's inflation remains lower than in the previous fiscal year, partly due to a higher comparison base from 2024/25.
Province-Wise Inflation (Mid-March 2026)
Inflation varies widely across Nepal's seven provinces and Kathmandu Valley:
- Madhesh Province: 4.95% — driven by high food prices and import dependency
- Lumbini Province: 4.21% — elevated due to industrial activity and demand pressure
- Koshi Province: 3.96% — above national average, regional supply constraints
- Kathmandu Valley: 3.64% — urban demand and housing costs
- Bagmati Province: 3.31%
- Gandaki Province: 2.87%
- Karnali Province: 2.21% — lowest, sparse population and lower demand
Food vs Non-Food Inflation
Historically in Nepal, food inflation tends to be higher than non-food inflation. The current rise to 3.62% is being driven significantly by the food and beverage component of CPI, which has higher weightage in the index for a country like Nepal where food expenditure is a major part of household budgets.
NRB's Response and Monetary Policy
The NRB's current monetary policy is broadly accommodative, supporting economic recovery. The central bank's inflation target is set at 5.5-6.5%. At 3.62%, there is still room for the current stance, but if inflation breaches the 4-5% mark, a shift toward tightening could occur.
Key NRB tools if inflation worsens:
- Increasing the Cash Reserve Ratio (CRR)
- Raising the policy rate (repo rate)
- Open market operations to absorb excess liquidity
What This Means for Consumers
For the average Nepali household, inflation at 3.62% means goods and services are, on average, 3.62% more expensive than a year ago. In provinces like Madhesh (4.95%) and Lumbini (4.21%), the pinch is felt more acutely — especially for daily necessities like food, cooking oil, and transportation.
Outlook for the Rest of FY 2025/26
Given the current trajectory, Nepal's annual average inflation for FY 2025/26 is likely to end between 2.5-3.5%, depending on how the remaining months (mid-March to mid-July 2026) evolve. A good harvest in the upcoming agricultural season and stable global commodity prices would help keep inflation in check.