The State Bank of Pakistan has raised its benchmark policy rate by 50 basis points to 12%, tightening monetary policy as higher global energy prices increase inflation risks.
The Monetary Policy Committee increased the rate from 11.5% to 12% at its October 26 meeting. Nine of the MPC’s 10 members reportedly voted in favour of the increase.
Pakistan Policy Rate Now at 12%
The latest change is:
Previous rate: 11.5%
New rate: 12%
Increase: 50 basis points
This is the first policy-rate increase since April 27, 2026, when SBP raised the benchmark rate by 100 basis points from 10.5% to 11.5%.
SBP subsequently kept the rate unchanged in June, July and September.
Why Did SBP Raise Interest Rates?
SBP Governor Jameel Ahmad said the inflation outlook had deteriorated significantly because of ongoing geopolitical tensions and developments in the Middle East.
Global oil prices remaining above $100 per barrel were cited as an important concern.
Higher energy prices can affect Pakistan through:
- more expensive fuel;
- increased electricity and transport costs;
- higher import payments;
- pressure on business costs; and
- broader inflation.
The central bank therefore opted for a tighter monetary stance to contain inflation risks.
Inflation Remains a Concern
Pakistan’s headline inflation had risen to 11.1% year-on-year in August, before moderating to around 10.26% in September.
Analysts had warned before the meeting that elevated international oil prices could keep inflation above SBP’s medium-term target.
What Does a 12% Policy Rate Mean for Borrowers?
The policy rate influences interest rates across Pakistan’s financial system.
A higher policy rate can eventually make borrowing more expensive for:
- businesses;
- consumers;
- home-finance customers; and
- other borrowers using variable-rate financing.
Actual lending rates depend on individual banks and the relevant benchmark or financing agreement.
What About Savers?
Higher interest rates can also support returns available on some savings and fixed-income products.
However, deposit and National Savings rates do not automatically move by exactly the same amount as SBP’s policy rate.
Any change should be confirmed from the bank or National Savings before assuming that today’s 50-basis-point increase will directly translate into a specific new profit rate.
Why Does SBP Use Interest Rates?
SBP’s primary monetary-policy objective is to achieve and maintain domestic price stability.
Raising rates generally makes borrowing more expensive and can help reduce inflationary pressure, although it can also slow investment and economic activity.
When Is the Next SBP Meeting?
The next Monetary Policy Committee meeting is scheduled for:
December 14, 2026.
The committee will review inflation, global commodity prices, economic activity and external-sector conditions before deciding whether to raise, hold or change the rate again.
Pakistan’s policy rate has increased to 12% after SBP raised it by 50 basis points on October 26.
The move reflects growing concern about inflation and global energy prices, particularly as geopolitical tensions continue to affect oil markets.
It is also worth correcting one detail circulating in some headlines: this is the first rate hike since April 2026, not June, after three consecutive meetings in which SBP kept the rate unchanged.
