SBP Issues Second 2026 Policy Report; Rate Hits 11.50%

The State Bank of Pakistan released its Monetary Policy Report for August 2026 on August 10, the second biannual report of the year. Governor Jameel Ahmad unveiled the publication following the Monetary Policy Committee meeting of July 27, 2026.

The SBP policy rate now stands at 11.50% per annum, with the overnight reverse repo ceiling at 12.50% and the overnight repo floor at 10.50%. The central bank continues to target medium-term inflation of 5 to 7 percent.

Contents

01

The Policy Rate at a Glance

02

From a Pause to a New Stance

03

How Monetary Policy is Set

04

Inside the August 2026 Report

05

The Road Ahead

The Policy Rate at a Glance

The policy rate is the interest rate at which the SBP lends money to banks overnight. Standing facilities form an interest rate corridor set 100 basis points below and above the policy rate. When the rate moves, banks pass borrowing costs on: a higher rate makes credit more expensive, while a lower rate makes it cheaper. The SBP notes that full effects on inflation often take six to eight quarters to materialise.

From a Pause to a New Stance

At its March 9, 2026 meeting, the sixth of the financial year, the MPC held the policy rate steady at 10.5%, pausing a cutting cycle that had reduced borrowing costs by 1,150 basis points in less than two years.

The MPC cited a sharply deteriorating geopolitical environment following the outbreak of war in the Middle East, which disrupted global fuel supplies, raised freight and insurance costs, and closed the Strait of Hormuz. Two further meetings were scheduled: the seventh on April 27 and the eighth on June 15, 2026.

How Monetary Policy is Set

Under the State Bank of Pakistan Act, 1956, the MPC is responsible for formulating monetary policy. The 10-member committee comprises the SBP Governor or a nominated Deputy Governor, three senior Bank executives, three SBP Board members, and three external members from economics, finance, or banking.

The SBP publishes Monetary Policy Reports biannually, within two weeks of the MPC meetings in July and January. After each meeting, the Bank issues a Monetary Policy Statement assessing economic conditions and announcing its decisions.

Inside the August 2026 Report

The August edition includes a press release, infographics, and a complete downloadable report. Governor Jameel Ahmad formally unveiled the document.

The Karachi Interbank Offered Rate, or KIBOR, calculated and published daily by the Financial Markets Association of Pakistan for tenors from overnight to one year, remains the reference rate for corporate loans, trade finance, and working capital financing.

The Road Ahead

With the second biannual report now public, market participants gain a clearer picture of the central bank's inflation and economic assessment. The SBP's advance calendar of MPC meetings for 2025-2026, published in July 2025, provides forward visibility on the policy timetable. The Bank's primary objective remains domestic price stability within the 5 to 7 percent target.