Karachi: The State Bank of Pakistan (SBP) announced an increase in its policy rate by 50 basis points to 12% during the Monetary Policy Committee's October 2026 meeting. The decision, supported by nine of the ten committee members, comes in response to a deteriorating inflation outlook linked to ongoing geopolitical tensions in the Middle East.

According to JS Global, the inflationary pressures were evidenced by the headline Consumer Price Index (CPI), which, despite easing to 10.3% in September 2026 from 11.1% in August, exceeded the expectations set by the committee. This increase was largely attributed to rising energy and wheat prices, while core inflation remained steady at approximately 8.4%. The central bank plans to revise its inflation and growth forecasts in January 2027.

The SBP's foreign exchange reserves stand at approximately $21.5 billion, covering around three months of imports. The bank aims to increase this figure to $23 billion by December 2026 and to $25 billion by June 2027. The current account deficit for fiscal year 2027 is anticipated to be within 0-1% of GDP, although it may approach the higher end of this range.