In a move that defied market expectations, the State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC) announced a sharp 100 basis point increase in the policy rate, raising it to 11.5%, effective April 28, 2026. The decision, revealed after the MPC meeting held earlier today, caught analysts off guard. 

Arif Habib Limited (AHL) had published a detailed preview arguing forcefully for maintaining the status quo at 10.5%. "Given the supply-driven nature of current inflationary pressures, responding with tightening risks a policy error," AHL had noted, pointing to transient base effects and contained core inflation.

Arif Habib Limited acknowledged that "calls for tightening have gained some traction, particularly around IMF considerations," but maintained that at 10.5%, policy was already in restrictive territory. Their survey showed only 17% had predicted a 100 bps hike, with 61% expecting no change.

The SBP’s move signals a decisive pivot, prioritising inflation anchoring over near-term growth support, even as the economy posts a 3.89% GDP expansion in Q2 and a $1.07 billion current account surplus in March.

The next MPC meeting in June, alongside the federal budget, will now be watched closely for any signs of reversal—or further tightening.

Earlier in March, the SBP maintained its policy rate unchanged at 10.5% following its meeting on March 9.

The cautious pause in March was seen as support for ongoing macroeconomic stability efforts, building on prior rate reductions (including the 50 bps cut to 10.5% in December 2025), while allowing time to monitor energy price dynamics, domestic inflation trends, and external account resilience.

The SBP emphasised in its previous many PMC statements a balanced approach to safeguarding price stability while nurturing sustainable growth recovery.