Forecast Targeting rule for monetary policy can fulfill the mandate of central banks in the best way possible. It means the selection of policy rate and a policy rate path in a way that forecast of future inflation and unemployment fulfill the mandate in best possible way. The main objectives of this paper are to estimate forecast targeting monetary policy rule in case of Pakistan and to evaluate whether Pakistan’s economy is driven by backward or forward looking behavior. For this purpose, we have used two types of models. A Backward-looking model incorporates the impact of price lags on policy rates. And Forward-looking model incorporates the expected inflation and unemployment on policy rate. Results of this study indicate have in Pakistan’s economy forward-looking is dominant. By adopting forecast targeting with forward-looking model, SBP can fulfill its mandate in the best way possible. in this study we have used quarterly data from 1971Q1 to 2019Q4. Supervisor:- Dr. Ahsan ul Haq Satti