The State Bank of Pakistan (SBP) on Monday raised its policy rate by 50 basis points to 12 percent, its first increase since April 2026. The decision followed a meeting of the MPC in Karachi, where Governor Jameel Ahmad said nine members voted for the rise and one member backed a larger increase.
The central bank said the move responded to a worsening inflation outlook shaped by geopolitics. Ahmad linked higher prices to the US-Israel conflict with Iran and wider Middle East tensions, which have pushed crude prices above $100 a barrel.
Domestic factors and inflation trends
Ahmad also pointed to domestic pressures, citing a rise in wheat prices over the past two or three months. “Geopolitical factors contributed to inflation,” he said.
Also read: SBP expected to raise policy rate amid inflation pressure
The SBP said headline inflation rose to 11.1 percent in August before easing to 10.26 percent in September. That remains well above the medium-term target of 5 to 7 percent, and consumer and business inflation expectations have also risen.
In its statement, the MPC said the consequences of the global shock had so far been limited due to policy actions and prudent macroeconomic management. However, it warned that risks to inflation, the current account and growth had risen. The hike, it said, was meant to contain second-round effects of the supply shock and keep inflation expectations anchored.
Growth forecast and key economic figures
The SBP kept its growth forecast for FY 2026-27 at 3.5 to 4.5 percent. The bank also cited the following figures:
- Exports: $32.5 billion
- Imports: $71 billion
- Workers’ remittances: $45 billion
- FX reserves: around $21.5 billion
The new policy rate will be in force from October 27, 2026.
