SBP policy rate 12 percent October 2026 is the new cost of borrowing in Pakistan, after the State Bank of Pakistan raised its policy rate by 50 basis points. The rate went up from 11.5 percent to 12 percent, and the new rate took effect from 27 October 2026. It is the second rate rise of the year, and it came because inflation is still high and the outlook for prices has got worse in recent weeks.
The Monetary Policy Committee nine votes tell the story of how firm the decision was. The committee has ten members, and nine of them voted for the increase. The meeting was held on 26 October, and the State Bank announced the decision the same day. At the September meeting, three members had already wanted a rise, so the move to nine votes in favour shows that concern about inflation has spread across the committee. The one member who did not vote for the rise wanted a bigger increase, according to reports of the press conference.
The reason for the rise is the inflation outlook. Headline inflation was 10.3 percent a year in September 2026, which was above the forecast, and the State Bank said the outlook had deteriorated. The committee pointed to the intensifying conflict in the Middle East and the low chance of a quick resolution, which have kept global energy prices high. Crude oil prices hovering around 100 dollars a barrel have added pressure on prices at home, and wheat supply problems in the country have added to the same pressure.
The State Bank inflation target 5 to 7 percent is the range the bank wants to bring inflation back to. The committee said the rise was needed to keep inflation expectations anchored, and to stop a supply shock from spreading into wider prices. In simple words, the bank wants people and businesses to believe that prices will come under control, so that they do not keep raising their own prices in advance. The bank said it will take longer than planned to bring inflation back into the target range, and that inflation in the current fiscal year will be higher than it had projected earlier.
The SBP policy rate corridor 11 to 13 percent is the new band around the policy rate. The floor, which is the overnight repo rate, is now 11 percent, and the ceiling, which is the overnight reverse repo rate, is now 13 percent. Each side sits 100 basis points from the 12 percent policy rate. The corridor matters because it sets the range in which banks lend to each other overnight, and it shapes the rates that banks charge on loans and pay on deposits.
Governor Jameel Ahmad SBP spoke at the press conference after the decision, and he explained the thinking behind the move. He said the decision was taken by a majority of nine out of ten members, and he pointed to oil prices and wheat prices as the main pressures. He also said the bank expects foreign exchange reserves to reach 23 billion dollars by December 2026 and 25 billion dollars by June 2027. The bank kept its growth forecast for the current fiscal year at 3.5 to 4.5 percent, and it expects growth to beat the 3.7 percent recorded in the last fiscal year.
For borrowers, the rise means dearer credit. A business that takes a loan to buy raw material or expand a factory will pay more interest, and a family that takes a loan for a car or a home will also pay more. The market had largely expected the move, and the three month Treasury bill had already cleared at 12 percent at the auction on 14 October, which is where the policy rate now sits. The 12 month bill sits at 12.5 percent, about 50 basis points above the new policy rate, which is roughly its usual gap.
For savers, the rise is better news, because banks usually pay more on deposits when the policy rate goes up. But the gain is limited, because inflation at 10.3 percent is still close to the return on many deposits. A saver who earns 12 percent on a deposit is only just ahead of inflation, and after tax the real return may be small. That is why the State Bank is keen to bring inflation down, so that the return on savings is real and not just on paper.
The SBP next MPC meeting December 14 is the date when the rate will be reviewed again. The committee meets on Monday 14 December 2026, and the decision will be announced the same day. The minutes of the October meeting are due in the week ending 20 November, and they should show what the one dissenting member wanted. Until December, the rate stays at 12 percent, and businesses and households will have to plan their borrowing around that cost.
Also Read: LPG Price in Pakistan Hits Rs630 a Kg in Open Market
Next: FBR Tax Collection Misses Target by Rs96bn in Four Months
