SBP Raises Policy Rate by 100bps to 11.5% Amid Rising Inflation Risks

The State Bank of Pakistan (SBP) has raised the policy rate by 100 basis points to 11.5%, marking the first increase in nearly three years and signaling a move back toward tighter monetary policy.

The decision was announced after the Monetary Policy Committee (MPC) meeting, with the new rate effective from April 28, 2026.

A Sharp Move — and a Surprise

The rate hike caught many off guard.

Most analysts had expected the SBP to hold the rate at 10.5%, which had remained unchanged since March.

Instead, the central bank opted for a full 100bps increase, signaling a clear shift in priorities from supporting growth to controlling inflation.

Why SBP Raised the Rate

The decision is largely tied to renewed inflation pressures.

• Oil prices have surged due to Middle East tensions
• Pakistan’s import bill is rising, especially for energy
• Inflation has already moved above the SBP’s 5–7% target range, reaching around 7.3% in March

With risks of inflation climbing further, the central bank moved to tighten policy early.

What a Higher Interest Rate Means

A rate hike affects the entire economy.

On one side:

• Borrowing becomes more expensive
• Business activity may slow
• Government debt servicing costs increase

On the other:

• Inflation can be controlled
• Currency stability improves
• Savings and investment returns may increase

The SBP is clearly prioritizing price stability over short-term growth.

A Shift After Months of Easing

This move reverses the earlier trend.

Since mid-2024, the SBP had been cutting rates aggressively from a peak of around 22%, bringing them down to 10.5% before this hike.

Now, with global uncertainty rising again, the central bank has paused that easing cycle and moved back into tightening mode.

What Happens Next

The next few months will be key.

• If inflation continues rising → more rate hikes are possible
• If conditions stabilize → SBP may hold or reverse course

The next MPC meeting, expected around the federal budget, will be closely watched.

Bottom Line

The SBP has made its stance clear.

With inflation risks building again, the central bank is willing to sacrifice short-term growth to keep prices under control.

This rate hike marks a turning point and signals a more cautious phase for Pakistan’s economy.