- Decision
- Maintain
- Rate change
- 0 bps
- policy rate
- 11.5%
The State Bank of Pakistan’s Monetary Policy Committee held the policy rate at 11.5%, with seven of 10 members supporting the decision, judging the stance appropriate to guide inflation toward target despite increased geopolitical uncertainty and a gradual pickup in activity. Over the past year, the rate was held at 11% in September-October 2025, cut by 50 basis points in December, held through March 2026, raised by 100 basis points in April and held thereafter. Headline inflation rose to 11.1% year on year in August, driven largely by food and energy prices, but is expected to ease toward the upper bound of the 5-7% target range by June 2027, while real GDP growth is projected at 3.5-4.5% in FY27 and private-sector credit growth remains broad-based. External pressures stayed contained as robust remittances, financial inflows and foreign exchange purchases lifted reserves to USD 21.4 billion. The prolonged Middle East conflict has increased global commodity prices and sustained supply-chain disruptions, raising risks to the outlook. The committee said it would closely monitor incoming data and developments in the Middle East, while stressing prudent monetary and fiscal policies, stronger buffers and timely 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.