The State Bank of Pakistan has raised its benchmark policy rate by 50 basis points to 12%, its Monetary Policy Committee deciding on 26 October 2026 with the new rate effective 27 October. Nine of the ten committee members voted for the 50-point rise, while one member favoured a larger increase. It is the first rise after three consecutive holds, following the previous increase to 11.5% earlier in the year.

A 9-1 vote for a half-point rise

The trigger was inflation running hot. Headline inflation in September was 10.3% year-on-year, above the bank's 5% to 7% medium-term target range, which it has now exceeded for seven consecutive months. Governor Jameel Ahmad cited a sharply worsened inflation outlook driven by the US-Iran conflict and Middle East tensions, crude oil above $100 a barrel, and higher wheat prices over the preceding two to three months.

Inflation above target for seven months

The bank said the move aims to anchor inflation expectations, prevent second-round effects from food and energy costs, and keep the real interest rate positive. Under the interest-rate corridor reported alongside the decision, the overnight reverse repo ceiling stands at 13% and the overnight repo floor at 11%, effective 27 October.

Sources: TradingView News and The Scoop.