- Decision
- Maintain
- Rate change
- 0 bps
- policy rate
- 11.5%
The State Bank of Pakistan’s Monetary Policy Committee unanimously held the policy rate at 11.5% on July 27, 2026, judging that an improved but still risk-prone macroeconomic outlook, moderating inflation, some pickup in activity and moderate external account pressures left the current stance appropriate to guide inflation back to the 5-7% target range over the medium term; the hold followed a 100 bp increase in April to 11.5%, reversing December 2025’s 50 bp cut to 10.5%. Headline inflation eased to 11.1% in June, with core inflation also moderating, but the committee said inflation is likely to remain above target in the next few months before gradually easing and stabilising near the upper bound by June 2027, while real GDP growth is expected at 3.5-4.5% in FY27 and private sector credit has picked up. On the external side, the current account posted a small deficit in FY26, State Bank of Pakistan foreign exchange reserves stood at around USD 17.3 billion on July 17 after earlier exceeding the end-June target, and reserves are targeted to rise to USD 20.20 billion by end-December 2026. The committee cited renewed Middle East conflict as a key risk after earlier de-escalation had lowered oil prices and eased supply disruptions, and also noted that the International Monetary Fund raised its global inflation forecasts amid higher commodity prices. The central bank reiterated its commitment to price stability and said it will closely monitor incoming data and evolving developments, while stressing the need to strengthen external and fiscal buffers and accelerate structural reforms.
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.