KARACHI, October 25, 2026: The State Bank of Pakistan (SBP) faces a difficult monetary policy decision as rising inflation and higher energy costs increase pressure on the central bank to consider another interest rate increase.
The SBP’s Monetary Policy Committee (MPC) is scheduled to meet on Monday, October 26, with the benchmark policy rate currently standing at 11.5 percent.
Some bankers and market analysts expect the central bank to raise interest rates by 50 basis points, while others believe a larger increase of 100 basis points may be needed to contain inflationary pressures.
Higher international oil prices, linked to instability in the Middle East, have added to Pakistan’s import costs and complicated the inflation outlook.
Consumer price inflation averaged approximately 10.2 percent during the first quarter of the 2026–27 fiscal year, compared with 4.3 percent during the corresponding period a year earlier.
A higher policy rate could help contain inflation expectations and support monetary stability. However, it would also increase borrowing costs for businesses and consumers at a time when economic activity remains under pressure.
The central bank must therefore balance the need to control inflation against the risk of slowing investment and economic growth.
Not all analysts favour an immediate increase, with some arguing that the SBP should maintain its existing rate while monitoring inflation and economic conditions.
The upcoming decision will test the central bank’s ability to balance inflation control with economic growth, as businesses and financial markets await its assessment of price pressures and broader economic conditions.