🏦 Quick answer: On 26 October 2026 the State Bank of Pakistan raised the policy rate by 50 basis points, from 11.5% to 12%, effective 27 October. Nine of the ten MPC members voted for it. SBP blamed oil prices above $100 a barrel, higher wheat prices and September inflation of 10.3%. If your home or car loan is KIBOR-linked, expect your instalment to rise at the next reset: about Rs3,800 a month on a Rs10 million home loan. Savers should see slightly higher returns. The next decision is on 14 December 2026.

Key facts

  • Decision: policy rate up 50 bps to 12%, announced 26 October 2026, effective 27 October.
  • Vote: 9 of 10 MPC members in favour. The other member reportedly wanted a bigger hike.
  • Why: oil above $100 a barrel due to the Middle East conflict, higher wheat prices, and September inflation of 10.3% (core about 8.4%), above SBP's expectations.
  • Real interest rate: about +1.7 points (12% minus 10.26%), up from +1.2.
  • SBP's FY27 outlook: GDP growth 3.5–4.5%, current account deficit 0–1% of GDP, reserves about $21.5 billion.
  • Next decision: 14 December 2026.

خلاصہ: اسٹیٹ بینک آف پاکستان نے 26 اکتوبر 2026 کو شرح سود 50 بیسس پوائنٹس بڑھا کر 11.5 فیصد سے 12 فیصد کر دی، جو 27 اکتوبر سے نافذ ہے۔ مانیٹری پالیسی کمیٹی کے دس میں سے نو ارکان نے اس کے حق میں ووٹ دیا۔ اسٹیٹ بینک کے مطابق تیل کی قیمت 100 ڈالر فی بیرل سے اوپر ہے، گندم مہنگی ہوئی ہے، اور ستمبر میں مہنگائی 10.3 فیصد رہی جو توقع سے زیادہ تھی۔ اگر آپ کا گھر یا گاڑی کا قرض کائبور سے منسلک ہے تو اگلی ری سیٹ پر قسط بڑھے گی: ایک کروڑ روپے کے 20 سالہ ہوم لون پر تقریباً 3,800 روپے ماہانہ۔ بچت کرنے والوں کو تھوڑا زیادہ منافع ملے گا۔ اگلا فیصلہ 14 دسمبر 2026 کو ہوگا۔

On this page

  1. What SBP decided
  2. Why SBP raised the rate
  3. SBP's outlook for the economy
  4. The policy rate in 2026
  5. Did the market expect it?
  6. What it means for your loans
  7. What it means for your savings
  8. Stocks and mutual funds
  9. What happens next
  10. What you should do now
  11. Key terms explained
  12. FAQs

What Did SBP Decide on 26 October 2026?

It raised the policy rate by half a point, to 12%. The State Bank of Pakistan's Monetary Policy Committee (MPC) met on Monday 26 October and Governor Jameel Ahmad announced the decision at a press conference in Karachi. The new rate applies from Tuesday 27 October (ProPakistani).

SBP monetary policy decision, 26 October 2026
Detail Value
New policy rate 12%
Previous rate 11.5% (since 28 April 2026)
Change +50 basis points
Announced / effective 26 October 2026 / 27 October 2026
MPC vote 9 of 10 in favour
Latest inflation 10.26% year-on-year (September 2026)
SBP inflation target 5–7% over the medium term
Real interest rate About +1.7 percentage points
Next MPC meeting 14 December 2026

It's SBP's first hike since April, when it raised the rate by a full point to 11.5%, and it ends a run of three holds in June, July and September. Business Recorder reported that the one MPC member who didn't vote for 50 basis points wanted a bigger increase (Business Recorder). Nobody on the committee argued for a hold.

Why Did SBP Raise the Interest Rate?

Because the inflation outlook got worse. The governor said the outlook had "deteriorated significantly" since the September meeting, as the Middle East conflict intensified and hopes of a quick end faded. SBP pointed to four things:

  • Oil above $100 a barrel. Pakistan imports most of its fuel, so high global oil prices feed straight into petrol, diesel, electricity and transport costs. For the background, see why the Iran-US war is hitting Pakistan's fuel prices.
  • Wheat. Wheat and flour prices have risen over the last two to three months, pushing up food inflation.
  • Inflation surprised on the upside. September CPI inflation was 10.3%, higher than the MPC had expected. Core inflation, which leaves out food and energy, was about 8.4%: still well above the 5–7% target.
  • People expect prices to keep rising. SBP's surveys showed consumers' inflation expectations had gone up, and both consumer and business confidence weakened.

SBP's worry is second-round effects: costlier fuel and flour turning into higher wages, fares and prices across the board, which would keep inflation high for longer. The MPC said the hike is meant to keep inflation expectations anchored, contain those second-round effects, keep the real interest rate positive and bring inflation back into the 5–7% range (The News). It also noted that several major central banks have raised rates and the IMF has revised its global inflation forecasts upwards.

📐 The real interest rate:

real rate = policy rate − inflation = 12% − 10.26% ≈ +1.7 points

Before the hike it was about +1.2 points. A wider positive gap means money in the bank or in government paper earns more than prices rise, which is what SBP wants while it's trying to bring inflation down. Our guide to Pakistan's inflation explains why this matters for your money.

What Does SBP Expect for the Economy?

Steady growth and stable reserves, but higher risks. Outside inflation, most of SBP's numbers held up. Here's what the Monetary Policy Statement and the governor's press conference said about FY2026-27 (July 2026 to June 2027):

SBP's economic outlook for FY2026-27, as of 26 October 2026
Indicator Latest / projection
Real GDP growth, FY27 3.5–4.5% (unchanged). FY26 revised to 3.7%.
Current account, FY27 Deficit of 0–1% of GDP. Q1 deficit: $874 million.
SBP foreign exchange reserves About $21.5 billion, roughly 3 months of imports
Workers' remittances, FY27 $45 billion (raised from $44 billion). Q1: about $10.9 billion.
Exports / imports, FY27 $32.5 billion / $71 billion
FBR tax collection, Q1 Up 7% year-on-year, Rs33 billion above target
IMF programme Staff-level agreement reached

The risks SBP listed are mostly the same ones that drove the hike: the Middle East conflict, volatile commodity prices, possible electricity and gas tariff increases, further wheat price rises, and bad weather, including a worsening El Niño (Business Recorder). The governor also said exports were below where they need to be, but that this wasn't because of interest rates.

How Has the Policy Rate Moved in 2026?

Up twice, by 150 basis points in total. SBP spent mid-2024 to late 2025 cutting the rate from a record 22% to 10.5%. The war in the Middle East reversed that.

SBP policy rate decisions in 2026
Date Decision Policy rate
Start of 2026 After 1,150 bps of cuts from the 22% peak 10.5%
+100 bps, first hike in almost three years 11.5%
June 2026 Hold 11.5%
Hold 11.5%
Hold 11.5%
+50 bps 12%
Next decision –

Our preview of this decision has the full story of how the rate got to 11.5%, including the monthly inflation figures.

Did the Market Expect the Hike?

Mostly, yes. Our own preview leaned towards a hold, based on the data up to 12 October, but by the week of the meeting most of the market had moved towards a hike:

  • In a Topline Securities poll, 61% of respondents expected a hike (54% expected 50 bps, 7% expected 100 bps) and 39% expected no change. Topline itself called 50 bps.
  • Foundation Securities also expected 50 bps, saying it would lift the real rate to about 2.5% on its own inflation estimate.
  • The Pakistan Institute of Development Economics (PIDE) argued for a conditional hold, saying conditions didn't yet make a compelling case for an immediate hike.

Because the decision matched most expectations, the stock market took it calmly. The KSE-100 rose in the sessions that followed, closing at 164,467 after a 1,429-point gain, helped also by easing oil prices (Express Tribune).

How Much Will Your Loan Instalment Go Up?

If your loan is KIBOR-linked, by roughly 0.5 points at your next reset date. Most bank home loans in Pakistan, and many car and personal loans, charge KIBOR plus a fixed spread. KIBOR, the rate banks lend to each other at, moves with the policy rate. Your agreement says how often your rate resets, usually every 6 or 12 months, so the hike reaches you then, not straight away. Fixed-rate loans don't change.

Here's what a 0.5-point rise does to typical loans, assuming KIBOR moves by the same amount:

Monthly instalments before and after a 0.5-point rate rise (illustrative rates, not bank quotes)
Loan Before After Extra per month
Home loan: Rs10,000,000 over 20 years 16%: Rs139,126 16.5%: Rs142,890 +Rs3,764
Home loan: Rs5,000,000 over 20 years 16%: Rs69,563 16.5%: Rs71,445 +Rs1,882
Car loan: Rs3,000,000 over 5 years 15%: Rs71,370 15.5%: Rs72,160 +Rs790
Personal loan: Rs1,000,000 over 3 years 20%: Rs37,164 20.5%: Rs37,419 +Rs255

Over the full 20 years, half a point adds about Rs900,000 of interest to the Rs10 million home loan, if rates stayed there. In practice they'll move again, up or down. Instalments use the standard formula:

EMI = P × r × (1 + r)n ÷ ((1 + r)n − 1)

where P is the loan amount, r is the annual rate ÷ 12 and n is the number of months. Put your own loan into our EMI calculator to see your numbers. Credit card rates are usually fixed by the bank rather than linked to KIBOR, but they can be revised too; our credit card calculator shows what carrying a balance costs.

What Does It Mean for Your Savings?

Slightly better returns, with a lag. When the policy rate rises, what you earn on savings usually follows:

  • Bank savings accounts and term deposits: banks tend to pass on higher rates to new deposits within weeks. Check what your bank offers on a new term deposit before rolling over an old one.
  • Money market funds: they hold very short-term paper, so their returns adjust within days to weeks without you doing anything.
  • National Savings: CDNS rates are reviewed regularly and follow government bond yields. They were last revised on 1 October 2026 (Defence Savings Certificates 11.80%, Behbood 12.72%, Special Savings 11.82%), and the hike makes another upward revision more likely. No new rates had been announced by 28 October. Check savings.gov.pk before you invest.

A rule of thumb: every extra 0.5 points on Rs1,000,000 is Rs5,000 a year before tax. That's useful, but after tax and 10% inflation the real gain is still small, so compare options on what's left after both. Our National Savings vs mutual funds comparison covers the trade-offs, the savings calculator shows how returns compound, and the inflation calculator shows what your money will really be worth.

What Does It Mean for Stocks and Mutual Funds?

  • Stocks: higher rates usually weigh on share prices over time, because deposits and government paper pay more and companies' borrowing costs rise. This time the hike was largely expected, so the KSE-100 went up, not down. Oil prices and the Middle East will probably matter more for stocks in the coming weeks. Our KSE-100 explainer covers how the index works.
  • Money market and cash funds: the clearest winners. Their returns rise with short-term rates.
  • Income and sovereign bond funds: they hold longer-dated government paper, whose prices fall when rates rise. A small hike that markets had expected usually has a small effect, but further hikes would hurt these funds before helping them.
  • Equity funds: they move with the stock market. If you invest monthly, keep going: the SIP calculator shows how steady contributions smooth out these swings.

What Happens Next?

The next decision is on 14 December 2026. Between now and then, three things will shape it:

  1. October inflation, which the Pakistan Bureau of Statistics publishes in early November. Another reading above 10% would keep pressure on SBP.
  2. Oil prices and the Middle East. SBP has tied its decisions closely to energy prices. A sustained fall in oil would ease the pressure; another spike could bring a further hike.
  3. Energy tariffs and wheat. SBP named possible electricity and gas tariff increases and further wheat price rises as risks.

SBP hasn't promised more hikes, but it hasn't ruled them out either. With one MPC member wanting a bigger increase this time, a cut in December looks unlikely unless inflation falls sharply. This is our reading of public statements, not a forecast or investment advice.

What Should You Do Now?

  1. Find out when your loan resets. Check whether it's fixed or KIBOR-linked and the next reset date. That's when the hike reaches your instalment, so budget for it now.
  2. Consider paying down expensive floating-rate debt. If you have spare cash and a KIBOR-linked loan, a part-prepayment now saves interest at the higher rate. Check your bank's prepayment charges first.
  3. Don't leave savings in a low-paying account. If your current account pays little or nothing, a savings account, term deposit or money market fund now pays noticeably more.
  4. Keep your emergency fund liquid. Money market funds and savings accounts adjust to rate changes on their own, so you don't need to time them. See our emergency fund guide.
  5. Don't react to one decision. Half a point changes your numbers a little, not your plan. Long-term investments should follow your goals, not the latest MPC meeting.

Key Terms Explained

Policy rate
The interest rate set by the State Bank of Pakistan that guides all other interest rates in Pakistan, from bank deposits to loans. 12% from 27 October 2026.
Basis point (bp)
One hundredth of a percentage point. 50 basis points is 0.5 percentage points, so 11.5% + 50 bps = 12%.
Monetary Policy Committee (MPC)
The ten-member SBP committee, chaired by the governor, that decides the policy rate and publishes a Monetary Policy Statement after each meeting.
KIBOR
The Karachi Interbank Offered Rate, the rate at which banks lend to each other. Most floating-rate loans in Pakistan are priced at KIBOR plus a fixed spread.
Real interest rate
The policy rate minus inflation. About +1.7 points after this hike. When it's positive, savings earn more than prices rise, before tax.
Core inflation
Inflation excluding food and energy. It shows how widely price rises are spreading. About 8.4% in September 2026.
Second-round effects
When an initial jump in fuel or food prices spreads into wages, fares and other prices, making inflation last longer.

Sources

This article uses SBP's Monetary Policy Statement of 26 October 2026, the governor's press conference as reported in the press, and news reports up to 28 October 2026. Loan examples are illustrations, not quotes from any bank. Nothing here is investment advice.

Update Log

  • : first published, two days after the decision. We'll update this page when National Savings rates are revised and when October inflation is published.

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