Pakistan central bank raises interest rate to 12 percent

The State Bank of Pakistan raised its benchmark interest rate by 50 basis points to 12 percent on Monday, October 26, 2026. The Pakistan Observer, Investing.com News, Arab News PK, TRT World, Briefs Finance, Bloomberg, and Aaj English TV all reported that the central bank increased the key rate to 12 percent. The move marks a shift in monetary policy following a period of steady borrowing costs. [1][2][3][4][8][9][10][11][12]

The decision was made during the third Monetary Policy Committee meeting of fiscal year 2026 to 2027, according to the Pakistan Observer. The central bank had kept the policy rate unchanged at 11.5 percent for its previous three meetings before deciding on the current increase. [1]

The Pakistan Observer reported that central bank officials raised the rate to tighten monetary policy as rising global oil prices, geopolitical tensions, and inflation risks weigh on the national economy. Arab News PK reported that a worsening Middle East conflict has added to inflation concerns, while TRT World noted that high energy costs contributed to the decision. [1][4][9][10]

An interest rate is the percentage of a principal sum charged for borrowing money over a period, typically a year. Oil prices are set by global supply and demand rather than domestic production levels alone. The latest rate increase in Pakistan aligns with expectations from market participants, according to the Pakistan Observer. [1][13][15]