SBP hikes policy rate to 12% on inflation, energy price worries

The State Bank of Pakistan raised its policy rate by 50 basis points to 12% on October 26, Business Recorder reported. Nine of the Monetary Policy Committee’s 10 members backed the increase, the first since June 2026, as the central bank cited rising energy and wheat prices and a worsening inflation outlook.

The MPC pointed to Middle East tensions, oil prices above $100 per barrel and higher inflation expectations as risks. It said the move was intended to keep inflation expectations anchored and bring inflation within its 5-7% target range; at the September 14 meeting, the rate had been held at 11.5%. The committee also noted that SBP reserves were around $21.5 billion and that a staff-level agreement had been reached with the IMF.