Pakistan's central bank has raised its benchmark policy rate by 50 basis points to 12%, the State Bank of Pakistan's Monetary Policy Committee decided at its meeting on 26 October 2026, with the new rate taking effect from 27 October. The previous rate was 11.5%.

The decision was backed by nine of the committee's ten members, with one member favouring a larger adjustment, according to Pakistani financial reporting of the announcement. It was the first rate rise after three consecutive meetings at which rates were unchanged, and the first hike since June 2026.

Why the bank moved

September headline inflation was 10.3% year on year, above the committee's expectations, while core inflation was around 8.4%. The bank cited the intensifying Middle East conflict, crude oil prices above $100 a barrel and domestic wheat-supply pressures as reasons for acting. Its medium-term inflation target range is 5–7%, and it projected GDP growth for FY2027 at 3.5–4.5%.

What it means for borrowers

A higher policy rate typically feeds through to lending rates across the economy, raising borrowing costs for businesses and households at a time when inflation is already running well above target. The bank's split vote, with one member wanting a bigger move, suggests further tightening cannot be ruled out if inflation stays elevated.