ISLAMABAD: The State Bank of Pakistan (SBP) on Monday raised its policy rate by 50 basis points to 12% from 11.5%, tightening monetary policy following a meeting of the Monetary Policy Committee (MPC) held on October 26, 2026.
The increase is expected to push up borrowing costs for businesses and consumers, potentially raising financing expenses for households and making loans more expensive for companies seeking funds for investment and expansion.
The policy rate serves as a key benchmark for borrowing costs across the economy, influencing bank lending rates, deposit returns, private-sector credit and overall economic activity.
The 50-basis-point increase marks a reversal of the previous policy rate level of 11.5%, with businesses and consumers potentially facing higher financing costs following the central bank’s decision.
The impact on economic activity will depend on how commercial banks adjust their lending and deposit rates and how businesses and consumers respond to the tighter monetary policy.