KARACHI: The State Bank of Pakistan (SBP) has increased its key policy rate by 50 basis points to 12%, tightening monetary policy amid persistent inflationary pressures and economic uncertainty.
The decision was announced on Monday, October 26, following a meeting of the central bank’s Monetary Policy Committee (MPC). The increase marks a shift from the previous policy rate of 11.5%, which the SBP maintained at its September meeting.
The policy rate serves as a key instrument for controlling inflation and influencing borrowing costs across Pakistan’s economy. An increase generally raises financing costs for businesses and consumers while encouraging savings and helping moderate demand.
The latest decision comes as Pakistan continues to face challenges from rising prices, higher global commodity costs and uncertainty surrounding the regional economic outlook. The ongoing conflict in the Middle East has also raised concerns about energy supplies, oil prices and potential disruptions to international trade.
In its previous monetary policy assessment, the SBP warned that inflation remained elevated and that risks to the economic outlook had increased. The central bank had projected inflation to gradually move towards the upper end of its 5–7% target range by June 2027.
The rate increase could affect businesses seeking loans, consumers with variable-rate financing and companies planning new investments. Higher borrowing costs may also influence private-sector credit and economic activity.
However, the impact will depend on how inflation, international commodity prices and domestic economic conditions develop in the coming months.
Further details explaining the committee’s decision were not included in the initial announcement.
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