Key points
- The State Bank of Pakistan raised its policy rate by 50 basis points, from 11.5% to 12%, effective 27 October 2026, after three meetings at which the rate was held.
- Nine of the Monetary Policy Committee's ten members voted for the rise.
- Headline inflation reached 10.3% in September, with core inflation elevated at about 8.4%, against the bank's medium-term target range of 5–7%.
- The bank blamed the intensified Middle East conflict, persistently elevated global energy prices and domestic wheat supply frictions — and kept its growth forecast for the fiscal year ending June 2027 at 3.5–4.5%.
Pakistan's central bank has raised its benchmark interest rate for the first time after three consecutive holds, moving to contain an inflation outlook it says has worsened markedly. The State Bank of Pakistan's Monetary Policy Committee decided on Monday 26 October 2026 to lift the policy rate by half a percentage point, from 11.5% to 12%, with the change taking effect the next day. Governor Jameel Ahmad announced the decision at a press conference in Karachi, where the bank is headquartered. Read more: Gold clings to $4,000 as Europe stumbles into the week that will decide rates
The decision turns on energy. The bank said the intensification of the Middle East conflict, and the low prospects of a near-term resolution, have kept global energy prices persistently elevated, worsening the inflation outlook compared with its earlier assessment. Domestic wheat supply frictions have added to the pressure. The bank said the domestic impact had so far remained contained, supported by earlier monetary adjustments and fiscal discipline, but that risks had increased — and that the rise was needed to keep inflation expectations anchored and to limit second-round effects from the ongoing supply shock.
The key figures
| Measure | Figure | Source |
|---|---|---|
| New policy rate | 12% | SBP statement, via Geo News / Express Tribune |
| Previous policy rate | 11.5% | SBP statement, via Geo News / Express Tribune |
| Rise | 50 basis points | SBP statement, via Geo News / Express Tribune |
| Committee vote | 9 of 10 in favour | SBP statement, via Geo News / Express Tribune |
| Effective from | 27 October 2026 | SBP statement, via Geo News / Express Tribune |
| September headline inflation | 10.3% | SBP statement, via Profit / ProPakistani |
| Core inflation | About 8.4% | SBP statement, via Profit / ProPakistani |
| Medium-term inflation target | 5–7% | SBP statement, via Profit / TRT World |
| Growth forecast, fiscal year to June 2027 | 3.5–4.5% | SBP statement, via Express Tribune / Profit |
| Revised growth, fiscal year 2026 | 3.7% | Express Tribune |
| Next meeting reported | 14 December 2026 | ProPakistani |
What the governor said
Governor Jameel Ahmad was blunt about what had changed since the committee last met in September. "Geopolitical conditions have led to an increase in energy prices," he said, adding that petroleum product prices had remained above $100. He said conditions had deteriorated compared with the September meeting, that wheat prices had also risen, and that expectations for inflation and for the current account deficit had increased somewhat.
What it means for borrowers
A higher policy rate normally feeds through into higher borrowing costs across the economy — for businesses taking loans, for households with variable-rate debt, and for a government that must service its own borrowing. The bank framed the cost differently: it said the decision would help preserve macroeconomic stability, which it described as necessary for sustainable economic growth. It also cautioned that further escalation in the conflict, and adverse weather, could weaken the outlook it has just left unchanged.
What happens next
ProPakistani reports that the committee's next meeting is scheduled for 14 December 2026. What the bank does then will depend on the two forces named in its statement: whether global energy prices ease as the Middle East conflict evolves, and whether inflation — still at 10.3% in September, well above the 5–7% target — starts to fall back towards it. Until then, the 12% rate stands as the bank's answer to a supply shock it says has not yet run its course.
Updates & corrections
Published 28 October 2026.
No updates or corrections have been made to this article since publication.
Sources
- Geo News, 26 October 2026, on the decision, the vote, the governor's remarks and the growth outlook: geo.tv
- Express Tribune, 26 October 2026, on the decision, the vote, revised fiscal-year 2026 growth and the next-meeting context: tribune.com.pk
- Profit by Pakistan Today, 26 October 2026, on the statement's reasoning, inflation figures and the target range: profit.pakistantoday.com.pk
- TRT World, 26 October 2026, on the hike, the energy backdrop and the target range: trtworld.com
- ProPakistani, 26 October 2026, on the decision, the three holds before it and the reported next meeting date: propakistani.pk