SBP Raises Policy Rate to 12% After Three Consecutive Holds

The State Bank of Pakistan (SBP) has raised its benchmark policy rate by 50 basis points, from 11.5% to 12%. The decision was announced on October 26 and takes effect on October 27, according to the central bank’s circular.

This is the first increase since April, when the Monetary Policy Committee (MPC) lifted the rate by 100 basis points to 11.5%. The MPC then kept the rate unchanged at its June, July and September meetings before making its latest move.

Why the SBP raised the rate

The MPC said the inflation outlook had worsened amid higher energy prices and geopolitical developments. It said the increase was intended to keep inflation expectations anchored, limit the wider effects of the supply shock and bring inflation back within the medium-term target range.

Nine of the committee’s 10 members voted for the increase, according to reporting on the decision. The SBP’s rate-setting announcement confirms the new 12% policy rate and sets the overnight interest rate corridor at 11% to 13%.

What happens next

The policy rate is a benchmark that influences borrowing and saving rates across the economy, although banks’ individual product rates may not change by the same amount or immediately.

The MPC’s next scheduled meeting is December 14, 2026. The committee’s future decisions will depend on economic conditions and its assessment of inflation risks.