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The Monetary Policy Committee of the State Bank of Pakistan decided by a seven-to-three majority vote to maintain the policy rate at its current level during the meeting held in Karachi. According to the central bank’s statement, the recent intensification of the prolonged Middle East conflict has pushed global commodity prices even higher while supply chain disruptions have persisted. The committee observed that recent domestic macroeconomic data turned out broadly in line with its expectations from the previous meeting.
Headline inflation climbed to 11.1 per cent year-on-year in August after registering 9.2 per cent in July, the SBP statement said, even as core inflation came in slightly below projections. External account pressures remained contained, backed by robust workers’ remittances and increased financial inflows that helped stabilise the balance of payments. High-frequency indicators pointed to a gradual recovery in economic activity following a slowdown observed in the fourth quarter of fiscal 2026.
The MPC assessed that the existing monetary policy stance continues to be appropriate for guiding inflation towards the medium-term target range of 5 to 7 per cent. At the same time, the committee noted that uncertainty surrounding the economic outlook has increased notably due to the worsening geopolitical environment. This decision marks the second consecutive hold after the July meeting and follows the 100-basis-point increase implemented in April.
That April hike represented the first upward adjustment in nearly three years, reversing part of the aggressive easing that had lowered the rate from a record 22 per cent in June 2024 through cumulative cuts totalling 1,150 basis points. A surprise 50-basis-point reduction in December 2025 had been followed by holds through early 2026 until the spring adjustment. The SBP’s approach reflects a cautious calibration amid fluctuating inflation and external risks.
The committee reiterated the need for fiscal reforms, particularly tax base broadening and efforts to curtail losses at public sector enterprises, to support higher and sustainable economic growth. Such measures would strengthen the economy’s resilience to recurring shocks according to the SBP assessment. The central bank’s data placed total liquid foreign exchange reserves at 23.7 billion dollars as of early September, providing a buffer against potential volatility from elevated oil prices that recently surpassed 107 dollars per barrel.
