SBP raises policy rate to 12% as Middle East conflict worsens inflation outlook

The State Bank of Pakistan raised its policy rate by 50 basis points to 12%, effective October 27, Profit by Pakistan Today reported. Nine of the Monetary Policy Committee’s 10 members supported the move, citing a worsening inflation outlook as the Middle East conflict intensified and global energy prices stayed high.

Inflation reached 10.3% year-on-year in September, while core inflation stood at around 8.4%. The committee also cited domestic wheat supply problems and warned that food and energy costs could add to inflation expectations. It kept its FY27 growth forecast at 3.5% to 4.5%, while noting a $874 million current-account deficit in the first quarter.

The rate increase comes as activity shows signs of recovery: large-scale manufacturing output grew 1.9% year-on-year in July and August FY27, and private-sector credit rose 14.1%. The MPC said the policy decision aimed to contain inflation and maintain macroeconomic stability, while identifying geopolitical tensions and commodity prices as continuing risks.