The State Bank of Pakistan increased its benchmark policy rate by 50 basis points to 12%, effective October 27, according to Profit by Pakistan Today. The decision was backed by nine out of 10 members of the Monetary Policy Committee, who pointed to a deteriorating inflation outlook driven by intensifying Middle East conflict and persistently elevated global energy prices.
Headline inflation rose to 10.3% year-on-year in September, with core inflation holding at approximately 8.4%. The committee also flagged domestic wheat supply challenges and cautioned that food and energy prices could further entrench inflation expectations. It maintained its FY27 growth projection at 3.5% to 4.5%, while highlighting a $874 million current-account deficit in the first quarter.
The rate hike coincides with signs of economic 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 stated that the decision aims to control inflation and preserve macroeconomic stability, while flagging geopolitical tensions and commodity prices as ongoing risks.
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