Central bank raises policy rate by 50 basis points to 12pc

Dawn · 26/10/2026، 12:20:14 PM

The State Bank of Pakistan (SBP) on Monday raised the key policy rate by 50 basis points to 12 per cent, its first increase since April as inflation, fuelled by high energy costs due to the Gulf conflict, remained above target. In a statement, the Monetary Policy Committee (MPC) said it had decided to increase the policy rate, with a majority decision of nine out of ten members. It noted that the “intensification in the Middle East conflict and low prospects of its near-term resolution” were keeping global energy prices at persistently elevated levels. “While the impact of this global shock on the domestic economy has remained contained so far amidst proactive monetary policy adjustment and continued fiscal discipline, geopolitical developments have worsened the inflation outlook as compared to the earlier assessment,” it said. It went on to say 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. It said that forex reserves had remained stable at around $21bn, Pakistan had reached a staff-level agreement with the International Monetary Fund (IMF) and that real gross domestic product (GDP) growth had been revised at 3.7pc, 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, major central banks had raised interest rates in the wake of rising inflationary pressures and the IMF had also revised its global inflation projections upwards. “While noting these developments and the increasing frequency of global supply shocks, t