SBP raises policy rate by 50 basis points to 12%

The State Bank of Pakistan (SBP) raised its key policy rate by 50 basis points to 12% on Monday, October 26, 2026. The rate had been 11.5%. The decision takes effect from October 27, 2026, the central bank said in a statement.

The Monetary Policy Committee (MPC) said nine of its ten members voted for the increase. It said the intensifying conflict in the Middle East and fading prospects of a near-term resolution were keeping global energy prices high.

The committee said the impact of the global shock on the domestic economy had stayed contained so far, helped by proactive monetary policy adjustment and continued fiscal discipline. It added that geopolitical developments had worsened the inflation outlook compared with its earlier assessment. Its outlook for the external account and economic growth was broadly unchanged, though risks to both had increased.

The MPC said the increase was needed to anchor inflation expectations, limit the secondary effects of the supply shock and bring inflation within its target range of 5% to 7%.

At a press conference, SBP Governor Jameel Ahmad said crude oil prices around $100 per barrel had added pressure on domestic prices. He said assessments in July and August had suggested inflation would stay around 7% toward the end of the year, but recent developments had changed that, and returning to the earlier expected level would now take longer. He said core inflation had improved but higher energy prices could cause secondary inflationary effects in the coming months.

On the external account, Ahmad said the central bank still expected the current account deficit to stay between 0% and 1% of GDP. He said Pakistan received $10.9 billion in remittances in the first quarter of the current financial year, and full-year remittances are now expected at $44 billion to $45 billion. He also referred to a remittance reward scheme expected to support inflows.

The governor said exports are projected at $32.5 billion to $33 billion this financial year, with growth below expectations. He said the import bill is expected to reach about $71 billion, which could complicate efforts to manage the external balance.

In September the MPC held the rate at 11.5%. According to a Topline Securities poll cited by The Express Tribune, 49% of respondents expected no change and 49% expected a hike before the announcement.