Islamabad, October 26, 2026: Pakistan's central bank on Monday raised the policy rate by 50 basis points to 12 per cent, the first such increase since April.
The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) said in a statement that it decided on the measure by a majority vote, with nine out of 10 members supporting it.
It cited the intensification of the West Asia conflict and the low prospects of its near-term resolution as sources of heightened global energy prices, adding that although the external account and growth outlook remained broadly unchanged, risks had also increased.
“Considering these developments and the evolving risks, the MPC deemed today’s decision as necessary to keep inflation expectations anchored, contain second-round effects of the ongoing supply shock and bring inflation within the target range of 5-7pc. This will help preserve macroeconomic stability, which is necessary for sustainable economic growth,” it said.
Inflation Outlook Worsens Amid Regional Conflict
Regarding inflation, which eased to 10.3 per cent in September from 11 per cent in August, the MPC said that the re-escalation of the Middle East conflict and domestic wheat supply frictions were two major factors keeping inflation at elevated levels.
It said their expected continuation over the next few months had “worsened the inflation outlook”.
“In view of these developments and increasing risks to the inflation outlook, the committee assessed today’s decision as important to keep the real policy rate adequately positive on a forward-looking basis,” it said.
Forex Reserves Stable At USD 21 Billion
The MPC said that foreign exchange reserves had remained stable at around USD 21 billion and that real gross domestic product (GDP) growth had been revised to 3.7 per cent, almost unchanged from the initial estimate.
It further said that the Federal Board of Revenue had exceeded its revenue collection target during the first quarter of the current fiscal year.
Regarding the external sector, the statement said exports were recovering, adding that remittances had remained resilient and were projected to be higher than the earlier assessment.
It stated that the committee expected GDP growth to remain within the previously projected range of 3.5 per cent to 4.5 per cent in FY27.
Governor Cites Inflation Risks
SBP Governor Jameel Ahmed also addressed a press conference to announce the decision and said there were many “underlying factors” behind it, especially the inflation outlook.
Ahmed noted a deterioration in the current account since the last MPC meeting. However, he added: “The good thing is that its impact is still between zero and one per cent of GDP and it will stay between that.”
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He also shared that the central bank had revised its outlook on remittances from USD 44 billion to USD 45 billion. He said exports were witnessing an improvement, but it was not yet in line with the economy’s needs, and added that imports would be close to USD 71 billion.
It is the first time the policy rate has been increased since April, when it was gradually pulled back from 22 per cent a year ago.
(Disclaimer: Except for the headline, this article has not been edited by FPJ's editorial team and is auto-generated from an agency feed.)
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