The SBP interest rate in Pakistan could move up at the next monetary policy meeting on 26 October, a Monday. Reports say the State Bank may lift its policy rate by 50 basis points, or half a percentage point, to 12% from 11.5%. The rate has been left unchanged since April, and the decision comes while inflation remains stubbornly high.
Inflation keeps pressure on the case for a hike
Double-digit inflation has appeared in five of the last six months, far above the 5% to 7% range the central bank aims for. In August, headline inflation, which tracks the overall price level, rose to 11.1% on a year-on-year basis from 9.2% in July. Core inflation, which leaves out the most volatile items, stood at 8.7%.
Higher electricity and gas costs, along with erratic global commodity prices, have kept price pressures alive. Households and firms also expect prices to keep climbing, and such expectations can feed into wage claims and what businesses charge. A rate increase would help the central bank cool demand before price rises become entrenched.
Reasons to wait, and what comes next
Several factors argue for patience. The rupee has been broadly stable and foreign exchange buffers are stronger, which gives the bank some room to wait and watch how inflation develops. The real interest rate, meaning the policy rate adjusted for inflation, sits below its historical average of about 2.5%. That suggests policy is less restrictive than usual, which is a point in favour of tightening.
Economic activity is also picking up. The economy grew 2.8% in the third quarter of 2026, after contracting 0.6% in the second quarter, a rebound that suggests it may handle higher borrowing costs better. At its previous meeting, the Monetary Policy Committee (MPC), the SBP's rate-setting panel, warned that the Middle East conflict had pushed commodity prices higher and prolonged supply disruptions. It expected inflation to ease toward the upper end of the target range by June 2027, but said the risks to that outlook had risen significantly.
The decision will require the SBP to weigh inflation control against the risk that costlier borrowing slows the recovery. A half-point increase would signal that the bank remains focused on containing prices even as activity improves. Any change in the SBP interest rate will show up first in bank lending and deposit rates. The MPC has also flagged further electricity and gas tariff changes, food price swings linked to El Niño, a weather pattern, and supply disruptions as risks.
Timeline: what has happened so far
- Since April: the policy rate has been kept unchanged, most recently at 11.5%.
- July: headline inflation stood at 9.2% year on year.
- August: headline inflation rose to 11.1%, and core inflation stood at 8.7%.
- Second quarter of 2026: the economy contracted 0.6%.
- Third quarter of 2026: the economy grew 2.8% year on year.
- Monday, 26 October: the SBP's monetary policy meeting, where a 50-basis-point increase is under consideration.
Aasan alfaaz mein
State Bank 26 October ko apni policy rate ka faisla karega, aur reports ke mutabiq rate 11.5 se barh kar 12 feesad tak ja sakta hai. Wajah yeh hai ke mehngai double digit mein hai aur bank qarz mehnga kar mehngai ko qaboo mein lana chahta hai. Agar rate barha to bank loan aur karobar ke qarz mehnge ho sakte hain, is liye ghar ka budget aur qarz ka plan pehle se sochen. Official faisla aane tak yeh sirf reports hain.
