SBP raises policy rate to 12% — what it means for your loan, savings and business
The State Bank raised its key rate by 50 basis points, its first hike since June, citing energy costs and inflation of 10.3%. Here is how it can affect loan instalments, savings and business costs.
The State Bank of Pakistan (SBP) has raised its policy rate by 50 basis points to 12%, from 11.5%, with effect from 27 October 2026. It is the central bank's first increase since June, after three meetings in a row with no change.
The Monetary Policy Committee took the decision on Monday, 26 October, with nine of its ten members in favour, ProPakistani reported.
Why the SBP raised the rate
The bank pointed to persistent global energy costs and rising inflation risks linked to the conflict in the Middle East.
- Inflation was 10.3% in September, higher than the committee had expected.
- Core inflation, which strips out food and energy, was about 8.4%.
- Higher energy and wheat prices were the main drivers.
The SBP warned that long-running geopolitical tension, volatile commodity prices and possible increases in energy tariffs could push prices up further. It expects GDP growth of 3.5% to 4.5% for the fiscal year ending June 2027.
What it means for your loan
Most car loans, home finance and business loans in Pakistan are priced at KIBOR plus a margin. KIBOR usually moves with the policy rate, so floating-rate instalments can rise at the next reset. Fixed-rate loans do not change.
Here is an illustration of a 0.5 percentage point rise on a floating loan (rates are examples, not bank offers):
| Loan | Before (16%) | After (16.5%) | Extra each month |
|---|---|---|---|
| Rs1,000,000 car loan, 5 years | Rs24,318 | Rs24,585 | about Rs267 |
| Rs3,000,000 home loan, 20 years | Rs41,738 | Rs42,867 | about Rs1,129 |
The longer the loan, the more a small rate change adds up.
What it means for savers
Bank savings accounts, term deposits and National Savings rates often follow the policy rate with a delay. Savers may see slightly better returns on new deposits — but with inflation at 10.3%, real returns stay thin.
What it means for businesses
- Running finance and working-capital loans become a little more expensive, which can squeeze margins for traders and manufacturers.
- Business groups are split: Dawn reported that foreign investors backed the move to fight inflation, while industry warned it could hurt exports and growth.
- If you plan to buy stock or machinery on credit, compare the new instalment before you sign, and keep a cushion for further changes.
When is the next decision?
The next Monetary Policy Committee meeting is scheduled for 14 December 2026.
Sources
- ProPakistani — SBP hikes interest rate first time since June 2026
- The Nation — SBP raises policy rate by 50 bps to 12pc
- Dawn — Business news, 27 October 2026
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