ISLAMABAD: The new monetary policy of the State Bank of Pakistan discusses challenges and opportunities on the economic front. Since the last MPR, global commodity prices have depicted a mixed trend. Oil prices have eased significantly and turned out lower than assumed in the previous report.
However, they have remained quite volatile, ranging from a low of around $60 to a high of $73 per barrel, and have rebounded recently following geopolitical developments in major producers.
Nevertheless, considering the general trend and outlook for global demand and supply, the average oil price assumption for FY26 has been revised down. Similarly, agricultural commodity prices, including rice prices, also posted a broad-based and more than anticipated decline. On the other hand, global metal prices – particularly those of iron and steel – turned out slightly higher than anticipated earlier.
In many advanced economies (AEs), including the US, UK, and Eurozone countries, headline inflation declined, while core inflation rose marginally – largely due to persistent services inflation. Meanwhile, emerging markets continued to record stable inflation outcomes, with both headline and core inflation easing slightly and remaining within target bands. The State Bank of Pakistan released the New Monetary Policy Report, February 2026, today.
In the January 2026 World Economic Outlook (WEO) update, the IMF has kept its projections for global inflation largely unchanged for CY26 and CY27 from its October 2025 assessment. However, it projects US inflation to converge to the Federal Reserve’s target more gradually than in other advanced economies. In response to the evolving inflation developments and outlooks, the US Fed reduced its Federal Funds Rate by a cumulative 75 bps over three separate meetings, which was more than anticipated by global markets at the time of the previous MPR.
Amidst heightened uncertainty and inflation staying within their target ranges, EM central banks have maintained a prudent stance, with rates being kept unchanged in a majority of decisions that took place since the August MPR. Moreover, central banks have generally remained cautious in their monetary policy decisions given the prevalent uncertainty, and policy rates are still above historical average levels in many countries.
The global growth outlook has improved since the last MPR, though geopolitical and trade tensions continue to pose major downside risks. In the January 2026 WEO, the IMF has slightly upgraded its global growth forecast for 2026 relative to its July 2025 WEO assessment. In 2027, the IMF expects global growth to decelerate to 3.2 percent. The outlook for global trade growth has been revised upward, largely due to the reduced level of global trade frictions from the previous assessment.
