The State Bank of Pakistan's Monetary Policy Committee has raised the policy rate by 50 basis points, from 11.5% to 12%, effective 27 October 2026. The decision was announced on Monday 26 October, with nine of ten committee members voting for the increase and one member favouring a larger adjustment. The new overnight corridor under the central bank's circular sets a ceiling of 13.00% and a floor of 11.00%.

Why the bank moved

Headline inflation was 10.3% year-on-year in September 2026, with core inflation around 8.4%, and the bank said the inflation outlook had worsened. It cited intensified Middle East conflict, persistently elevated global energy prices, and domestic wheat supply frictions alongside higher wheat and energy prices. The bank's medium-term inflation target range is 5–7%, and it maintained its real GDP growth projection for 2026–27 at 3.5–4.5%.

Reaction split

The bank cited reserves near $21.5 billion, about three months of imports, and Governor Jameel Ahmad announced the decision in Karachi. Business reaction was split: the Overseas Investors Chamber welcomed the move, while the FPCCI, the Karachi Chamber, SITE, Korangi and textile exporters opposed it, warning about borrowing costs and export competitiveness.

Higher policy rates feed through to borrowing costs for businesses and households, which is why exporters and trade bodies opposed the move even as investors welcomed the signal on inflation. The committee will have to judge whether the tighter stance brings inflation back towards its target range without squeezing growth that it still projects at 3.5–4.5%.

Sources: PKRevenue; Treasure Pakistan, October 2026.