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Why the SBP Raised Pakistan’s Policy Rate to 11.5%—and Where It Stands Now

The SBP raised its policy rate to 11.50% in April 2026 in response to inflation risks from supply shocks, then held it at 11.5% in September.
From TheFinanceBase Team3 min to read
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The State Bank of Pakistan (SBP) raised its policy rate by 100 basis points to 11.50% on 27 April 2026, effective 28 April, as the Monetary Policy Committee (MPC) responded to supply shocks and the risk of inflation staying above target. That was not the latest policy action: on 14 September, the MPC kept the rate at 11.5%. Its September statement reported August year-over-year headline inflation of 11.1%, up from 9.2% in July.

Why did the SBP raise the policy rate in April?

In its 27 April 2026 monetary policy statement, the MPC pointed to a prolonged conflict in the Middle East and its effects on global energy prices, freight charges, insurance premiums and supply chains. These pressures, it said, were likely to push inflation higher and keep it above the target range for the next few quarters.

The committee said a tighter policy stance was needed to anchor inflation expectations and contain second-round effects of the supply shock. In other words, the rate increase was a response to the risk that higher costs would spread more broadly through prices and expectations—not a claim that interest rates could directly reverse the underlying supply disruptions.

Inflation figures available at the time

The April statement cited March headline inflation of 7.3% and core inflation of 7.8%. These were the readings available when the committee made its decision, not the latest figures reported later in the year.

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What is Pakistan’s policy rate now?

As of 14 September 2026, the most recent MPC decision in the cited statements, the SBP had held the policy rate at 11.5%. The decision was made by a majority of seven of the committee’s ten members. The SBP homepage snapshot accessed on 8 October also displayed a policy rate of 11.50%.

The April increase therefore was not followed by another change in the September decision. The rate rose to 11.50% effective 28 April and remained at that level in the 14 September statement.

How high was inflation in the latest figures reported by the MPC?

The 14 September MPC statement reported year-over-year headline inflation of 9.2% in July and 11.1% in August. It also reported core inflation at 8.7%. These are different measures: headline inflation includes the broader consumer basket, while core inflation is a separate indicator cited by the committee.

What the MPC said was driving the increase

  • Food: Higher wheat and allied-product prices, along with perishable-item prices, accounted for much of the recent increase, according to the MPC.
  • Energy and transport: Elevated energy inflation and fuel-price increases added to transport costs.
  • High-speed diesel: A change in the diesel pricing mechanism sharply reduced its price in August, partly offsetting higher global prices.

What does the SBP expect inflation to do?

The MPC said inflation was expected to ease gradually toward the upper bound of its 5–7% target range by June 2027. That is the central bank’s outlook, not a guaranteed outcome. Its September statement said risks had increased significantly and identified several factors that could alter the path.

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  • Volatility in global commodity prices.
  • Adjustments to electricity and gas tariffs.
  • Supply disruptions.
  • Unexpected food-price movements amid worsening El Niño conditions.
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Will the April rate hike bring inflation down?

The stated purpose of tighter policy was to anchor inflation expectations and contain second-round effects of supply shocks. Interest-rate policy can also restrain demand-side pressure, but the cited statements do not isolate the April increase’s causal effect on the later inflation figures. The rise in year-over-year headline inflation from 9.2% in July to 11.1% in August is reported alongside the MPC’s explanation of food and energy pressures; it does not, by itself, show that the rate increase caused that movement.

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