Pakistan's central bank has raised its benchmark policy rate by half a percentage point to 12%, effective Tuesday 27 October 2026. The State Bank of Pakistan's Monetary Policy Committee announced the decision on Monday, with nine of its ten members voting in favour. The remaining member favoured a larger increase.

The bank said the inflation outlook had worsened since its previous assessment. It pointed to the intensifying conflict in the Middle East, persistently high global energy prices, and domestic wheat supply problems. Headline inflation reached 10.3% year on year in September, above what the committee had expected, while core inflation was around 8.4%.

Why the bank acted now

Officials said the increase was needed to anchor inflation expectations and limit second-round effects from higher food and energy costs. The bank aims to bring inflation back to its medium-term target range of 5% to 7%, although it warned that the path back to that range could take longer than previously expected.

Despite the tighter stance, the bank kept its growth outlook for 2026-27 broadly unchanged, at 3.5% to 4.5%. It said the external account and growth outlook had not shifted materially, but that risks had risen because of geopolitical uncertainty and commodity price volatility.

Sources: Treasure Magazine and The Scoop.