- Decision
- Maintain
- Rate change
- 0 bps
- policy rate
- 10.5%
The Monetary Policy Committee of the State Bank of Pakistan on 9 March 2026 kept the policy rate at 10.5 %, judging the current stance appropriate to preserve “hard-earned” price stability even as the Middle-East war has abruptly lifted global fuel, freight and insurance costs and heightened macroeconomic uncertainty. This follows cumulative easing of 150 bp since May 2025, most recently a 50 bp cut in December. The Committee offered no new liquidity measures but noted continued interbank FX purchases that have raised reserves to USD 16.3 bn by 27 February amid a January current-account surplus, leaving the July–January deficit at USD 1.1 bn and allowing a reserve-build target of USD 18 bn by June to remain in sight. Headline inflation accelerated to 7 % y/y in February and core to 7.6 %, and the MPC now sees price gains staying above 7 % through the rest of FY26 and into FY27, with upside risks from volatile energy and food costs and the regional conflict; still, it maintains its FY26 GDP growth forecast at 3.75–4.75 % on the back of firmer high-frequency indicators and PKR 790 bn in private-sector credit expansion by 20 February, even as FBR revenues lag target. The Committee also cited the potential drag from recently announced US global tariffs and reiterated that prudent fiscal policy and faster structural reforms are essential, signalling willingness to respond if risks to inflation or financial stability intensify.
Rate evolution
The State Bank of Pakistan’s policy rate rose by a net 50 basis points over the period, moving from a prolonged hold at 11 percent to a 50 basis point cut in December 2025, a reversal to 11.5 percent in April 2026 and holds at that level in June, July and September. Through October 2025, the Monetary Policy Committee held at 11 percent as inflation stayed moderate and core inflation eased, even as activity recovered and it flagged widening trade deficits, weak inflows, energy-price risks, commodities and flood-related shocks. The December cut reflected inflation averaging within the 5 to 7 percent target range, relatively benign commodity prices and anchored expectations, with the Committee seeing room to support sustainable growth despite sticky core inflation and a difficult export environment.
It held at 10.5 percent in early 2026 as stronger domestic momentum met higher geopolitical uncertainty over energy costs and supply disruptions, before raising the rate by 100 basis points in April to keep expectations anchored and contain second-round effects after inflation and core inflation rose, with inflation projected to stay above the 5 to 7 percent range for most of FY27. The Committee held the policy rate at 11.5 percent on June 15, judging the stance appropriate to guide inflation towards the target range over the medium term, and again on July 27 as lower global oil prices, moderating inflation and contained external pressures improved the outlook, though renewed regional conflict kept risks elevated. On September 14, it maintained the rate at 11.5 percent as headline inflation rose to 11.1 percent in August from 9.2 percent in July, global commodity prices increased and supply disruptions persisted amid the intensifying Middle East conflict, while external pressures remained contained and activity began to recover, with the Committee judging the stance appropriate despite increased uncertainty.