The State Bank of Pakistan’s Monetary Policy Committee (MPC) raised the policy rate by 50 basis points to 12%, effective October 27, 2026, citing a worsening inflation outlook despite broadly unchanged growth and external-account prospects. This followed a cut to 10.5% in December 2025 and a 100-basis-point increase to 11.5% in April 2026. Headline inflation reached 10.3% year-on-year in September, above expectations, as elevated energy prices and domestic wheat supply frictions increased the risk of second-round effects. The MPC retained its real gross domestic product growth forecast of 3.5–4.5% for FY27, with activity recovering gradually and private-sector credit expanding across working capital, fixed investment and consumer finance. Foreign exchange reserves remained stable at around USD 21.5 billion, supported by continued purchases and reaching three months of import cover. The intensifying Middle East conflict is keeping global energy prices persistently elevated, while major central banks have raised interest rates amid mounting inflationary pressures. The MPC stressed the need to keep the forward-looking real policy rate adequately positive to anchor inflation expectations and bring inflation within the 5–7% target range over the medium term.
State Bank of Pakistan Raises Policy Rate by 50 Basis Points to 12%
The State Bank of Pakistan’s Monetary Policy Committee raised the policy rate by 50 basis points to 12%, effective October 27, 2026, citing a worsening inflation outlook. Headline inflation reached 10.3% year-on-year in September, above expectations, as elevated energy prices and domestic wheat supply frictions increased the risk of second-round effects.