Monetary policy is the management of a nation's money supply and interest rates by its central bank to influence overall economic activity. By adjusting the "cost" of money through interest rates, central banks can either stimulate a sluggish economy by making borrowing cheaper, or cool down an overheating economy by making it more expensive.
The primary objective of monetary policy is to achieve and maintain domestic price stability , which is essential for businesses and consumers to plan their future saving, consumption and investment decisions.
State Bank of Pakistan (SBP) is mandated to formulate and implement monetary policy in Pakistan.
11.50% p.a.
SBP Overnight Reverse Repo (Ceiling Rate)
12.50% p.a.
SBP Overnight Repo Rate (Floor) Rate
10.50% p.a.
In Pakistan, the primary objective of the State Bank of Pakistan (as per Section 4B of the SBP Act 1956, as amended up to January 2022), is “…to achieve and maintain domestic price stability”. Section 2 of the SBP Act 1956 defines price stability as the maintenance of low and stable inflation, guided by the government’s medium-term inflation target. The SBP is following a medium-term inflation target of 5 – 7 percent.
The State Bank of Pakistan’s Monetary Policy Committee is mandated to set monetary policy in the country. The SBP conducts monetary policy using various tools, with the policy rate as the main instrument. Through the policy rate, SBP targets the overnight money market repo rate. The rates for the SBP’s standing facilities – forming the interest rate corridor – are set 100 basis points below (floor or reverse repo) and above (ceiling or repo) the policy rate.
It is important to note that monetary policy does not impact the economy instantly. While short-term rates like overnight repo rate, may adjust immediately, the full effects on inflation often take 6-8 quarters (1-2 years) to materialize, as households and businesses gradually adapt to changes in interest rates.
Once the MPC sets the policy rate, the SBP conducts open market operations and uses other macro prudential tools, such as reserve requirements for banks, to manage money supply. Each of these tools play a role in influencing interest rates at which businesses and individuals borrow and invest. This, in turn, influences economic activity.
To make the process of monetary policy formulation more predictable and transparent, the State Bank of Pakistan has decided to issue the yearly schedule of Monetary Policy Committee meetings for FY27. In this regard, the dates for Monetary Policy Statements, Analyst Briefings, Monetary Policy Reports and other related releases for the next 12 months are, as follows:
| MPC Meeting Date | Monetary Policy Statement & Information Compendium | Analyst Briefing Slide Deck | Post-MPC Press Conference | MPC Minutes - Week Ending2 | Monetary Policy Report |
|---|---|---|---|---|---|
| 27-Jul-26 | 27-Jul-26 | 28-Jul-26 | 27-Jul-26 | 21-Aug-26 | 10-Aug-26 |
| 14-Sep-26 | 14-Sep-26 | 15-Sep-26 | – | 09-Oct-26 | – |
| 26-Oct-26 | 26-Oct-26 | 27-Oct-26 | 26-Oct-26 | 20-Nov-26 | – |
| 14-Dec-26 | 14-Dec-26 | 15-Dec-26 | – | 08-Jan-27 | – |
| 25-Jan-27 | 25-Jan-27 | 26-Jan-27 | 25-Jan-27 | 19-Feb-27 | 08-Feb-27 |
| 08-Mar-27 | 08-Mar-27 | 09-Mar-27 | – | 02-Apr-27 | – |
| 26-Apr-27 | 26-Apr-27 | 27-Apr-27 | 26-Apr-27 | 21-May-27 | – |
| 17-Jun-27 | 17-Jun-27 | 18-Jun-27 | – | 12-Jul-27 | – |
Note:
For Details:
The objectives of the State Bank of Pakistan are set out in Section 4B of the SBP Act 1956 (as amended up to January 2022), which states:
Price stability means the maintenance of low and stable inflation guided by the government’s medium-term inflation target. (Section 2 of the SBP Act 1956, as amended up to January 2022)
The State Bank of Pakistan conducts monetary policy using various tools, with the policy rate as the main instrument. Through this rate, SBP targets the overnight money market repo rate that signals the monetary policy stance. The policy rate is set within the Interest Rate Corridor (IRC) bounded by SBP’s Standing facilities that is Reverse Repo (Ceiling) and Repo (Floor) facility.
Besides policy rate, the bank performs open market operations to manage liquidity, and use other macro prudential tools such as reserve requirements for banks to control money supply. Each of these tools play a role in influencing the interest rates and the economic activity.”
