What happened

According to Dawn, the State Bank of Pakistan (SBP) raised its benchmark interest rate by 50 basis points on Monday, elevating the key policy rate from 11.5 per cent to 12 per cent. SBP Governor Jameel Ahmed announced the decision during a press conference in Karachi following a Monetary Policy Committee (MPC) meeting. The committee reviewed economic developments that occurred since its previous meeting in September. Out of ten MPC members, nine voted in favor of the 50 basis point hike, while one member supported a larger increase. Brokerage firm Topline Securities stated that the central bank's move aligned with market expectations.

Key facts

  • The policy rate rose to 12 per cent following a 9-1 vote by MPC members.
  • The central bank revised its projection for annual remittances upward from $44 billion to $45 billion.
  • Total imports for the country are estimated to reach around $71 billion.
  • While export figures have shown progress, SBP officials noted the trend does not yet fulfill the broader needs of the economy.
  • Economic growth for the final quarter of the previous fiscal year was revised downward from 2.9 per cent to 2 per cent due to Middle East disruptions, while last year's overall growth estimate was 3.7 per cent.
  • The current account has experienced deterioration since September, but its overall impact is projected to remain between zero and one per cent of GDP.
  • Prior to this increase, the central bank had cut rates by a cumulative 1,050 basis points since mid-2024 from a record high of 22 per cent reached in June 2023.
  • The date for the upcoming monetary policy meeting is not specified in the source; please check the official notice.

Why it matters

According to Dawn, Governor Ahmed highlighted several primary drivers behind the policy rate increase, with a major focus on managing the outlook for inflation. Global issues, including the US-Israel war on Iran and its subsequent impact on oil and energy costs, were key considerations alongside domestic market shifts. The MPC also took into account consumer expectations, forecaster evaluations, and the broader effect of global commodity prices on Pakistan's external account. Although declining inflation had allowed the SBP to significantly lower rates in recent months, rising energy risks and international supply challenges led officials to tighten monetary policy once again.

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Source: Dawn - Home · Published October 26, 2026 · Photo by Joshua Hoehne on Unsplash