Pakistan: State Bank raises policy rate to 12%, effective 27 October 2026

Pakistan's central bank has raised its main interest rate, lifting the State Bank of Pakistan (SBP) policy rate by 50 basis points, from 11.5% to 12%, on 26 October 2026. The new rate takes effect on 27 October 2026, and it is the first increase since April 2026.

Key takeaways

• The State Bank of Pakistan raised its policy rate by 50 basis points, from 11.5% to 12%, on 26 October 2026.
• The new rate takes effect on 27 October 2026.
• Nine of the Monetary Policy Committee's ten members voted for the increase.
• The bank pointed to high energy prices and a worsened inflation outlook, and said the move aims to bring inflation back into its 5% to 7% target range.

What happened

The SBP's Monetary Policy Committee decided the increase at its meeting on 26 October 2026. The Express Tribune quotes the bank's statement: the committee "decided to increase the policy rate by 50 bps to 12 per cent in its meeting today, with the majority decision of nine out of ten members, with effect from October 27, 2026". Dawn reports the same decision and the same previous rate of 11.5%.

For context, the April 2026 rise was the previous move: the bank raised the rate by 100 basis points then, held it at 11.5% at the meetings that followed, and that April rise was itself the first increase in nearly three years. Before it, the bank had cut the rate by a cumulative 1,050 basis points since mid-2024, from a record 22% reached in June 2023, as inflation cooled from multi-decade highs.

Why the bank moved

The bank's statement gives one main reason, energy prices, saying the intensifying conflict in the Middle East, with diminishing prospects of a near-term resolution, was keeping global energy prices persistently high. Geo News reports Governor Jameel Ahmad telling the press conference afterwards that crude oil prices had stayed around $100 a barrel, and that conditions had deteriorated since the committee's September meeting, with expectations for inflation and the current account deficit both somewhat higher.

The inflation numbers show why the bank acted even though headline inflation has eased from its peak. Annual headline inflation was 10.3% in September, down from 11.1% in August but well above the bank's 5% to 7% target range, while wholesale price inflation rose to 13.3% in September from 11.8% in August. The bank said the increase was necessary to keep inflation expectations anchored, limit the second-round effects of the supply shock, and bring inflation within its target range.

The bank's broader outlook was broadly unchanged, with the governor putting economic growth for the current fiscal year at 3.5% to 4.5%, exports expected to reach $32.5 billion, imports $71 billion, and workers' remittances $45 billion.

Who it affects

The policy rate is the anchor that banks in Pakistan price their own lending and deposit rates from, so the decision reaches anyone in the country with a variable-rate loan, a business borrowing line, or money in a savings account. A rise in the policy rate does not change every loan or deposit rate overnight, and the size of the change differs by bank and product, but borrowing costs are now headed up rather than down.

What it means in general terms

For borrowers, a higher policy rate generally means new loans and variable-rate loans cost more over time, which raises the monthly cost of borrowing. For savers, it generally means banks can offer better returns on deposits, though deposit rates move at each bank's own pace. For the wider economy, the bank is accepting some restraint on growth. The alternative it is guarding against is energy-driven price rises spreading into wages and other prices, which would be harder to bring back down later.

What to watch

Two things decide whether this is a single step or the start of a longer tightening phase. The first is energy prices. If they stay high, the inflation pressure the bank cited stays in place. The second is the next inflation prints, which show whether the September easing continues or stalls. The next committee decision will be read against both.

This piece states the rate as set on 26 October 2026, effective 27 October 2026. It stays current until the State Bank changes the rate again.