- Decision
- Raise
- Rate change
- 100 bps
- policy rate
- 11.5%
The Monetary Policy Committee of the State Bank of Pakistan raised the policy rate by 100 bp to 11.50 % with effect from 28 April 2026, arguing that protracted Middle-East hostilities have pushed up global energy, freight and insurance costs, heightened supply-chain disruptions and are set to lift inflation above the 5–7 % target for several quarters, warranting a tighter stance to anchor expectations and curb second-round effects. The move unwinds December 2025’s 50 bp cut to 10.50 % and follows an unchanged decision in March 2026. Headline CPI accelerated to 7.3 % y/y in March and core inflation edged up to 7.8 %, while the MPC now sees inflation reaching double digits soon and staying above the target band through most of FY27 amid deteriorating consumer and business sentiment. Real GDP expanded 3.8 % in H1-FY26, but growth is expected to slip toward the lower end of earlier projections, with private-sector credit still advancing about 13 % and broad money growth easing to 14.5 % by 10 April from 16 % in February. Externally, resilient remittances produced a small current-account surplus in July-March FY26, and foreign-exchange reserves stood at USD 15.8 bn on 24 April, with Eurobond issuance expected to lift them above USD 18 bn by June despite sizable debt repayments. The Committee highlighted the need to keep strengthening FX buffers and maintaining fiscal discipline, and it warned that the inflation path remains subject to the duration and intensity of the regional conflict, energy price pass-through and fiscal developments.
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.