SBP Policy Rate Raised to 12% in Pakistan: What It Means for Your Loan and Savings

The State Bank of Pakistan (SBP) raised its policy rate by 0.5 percentage point to 12% on Monday 26 October 2026, with effect from Tuesday 27 October. Nine of the ten members of the Monetary Policy Committee (MPC) voted for the rise. The interest rate corridor is now 11% to 13%.

This is the second rise of 2026. The rate had been 11.5% since 28 April 2026. Below we set out what the SBP said, what the rise does to a KIBOR-linked car or home loan, and why the minimum profit on a bank savings account should go up from 1 November.

The SBP raised the policy rate to 12% from 27 October 2026

The MPC met on 26 October 2026 and lifted the policy rate from 11.5% to 12%, effective 27 October. Nine of ten members backed it. The SBP says the rise should keep inflation expectations anchored and bring inflation back to 5 to 7%.

We read the Monetary Policy Statement dated 26 October 2026 on sbp.org.pk on the night of 26 October. It gives the war in the Middle East as the main reason. The SBP says the conflict has intensified, there is little sign of an early end, and global energy prices are staying high. It says that has "worsened the inflation outlook" since its last meeting on 14 September, when it held the rate at 11.5%.

The vote matters. At the September meeting, three of ten members had already wanted a rise, as the September MPC minutes showed. This time nine wanted one. The statement does not say what the tenth member wanted. The minutes, due on 20 November 2026, should.

The new interest rate corridor is 11% to 13%

SBP's DMMD Circular No. 04 of 2026, issued on 26 October, sets the ceiling (overnight reverse repo) at 13% and the floor (overnight repo) at 11%, each 100 basis points from the 12% policy rate. The width stays 200 basis points, effective 27 October 2026.

A basis point is one hundredth of a percentage point, so 100 basis points is one point. The corridor is the band inside which SBP keeps the overnight rate banks lend to each other. The policy rate and corridor work the same way as before. Only the levels moved.

Inflation of 10.3% in September pushed the decision

Headline inflation was 10.3% a year in September 2026, above the MPC forecast. Core inflation, which leaves out food and energy, was about 8.4%. The SBP named high energy prices and "domestic wheat supply frictions", meaning wheat supply problems, as the two drivers.

With a 12% policy rate and 10.3% inflation, the gap is 1.7 points. The SBP says it wants this "real" rate to stay "adequately positive" looking forward, so that saving in rupees still beats rising prices. It lists the risks it is watching: more war, oil and food prices, sudden changes in electricity and gas tariffs, and the weather.

The statement also gives a short scorecard. SBP's own reserves stayed near $21.5 billion, about three months of imports, and a staff-level agreement was reached with the IMF. Growth for FY27 is still expected at 3.5 to 4.5%.

A KIBOR-linked loan will cost more at its next reset

Most car, home and business loans in Pakistan are priced at KIBOR plus a margin and reset once or twice a year. KIBOR tends to follow the policy rate. A 0.5 point rise adds a few hundred to about two thousand rupees a month.

KIBOR (Karachi Interbank Offered Rate) is the benchmark banks use. On 26 October the 1-year offer rate was already 12.79% and the 6-month 12.45%, both above the new 12% policy rate. That means part of the rise was priced in before the meeting. Whether KIBOR moves further from 27 October will show in the next fixings, which we track on the KIBOR rate today page.

We worked out three examples with the standard instalment formula. The margins are examples only, not any bank's offer.

A fixed-rate loan does not change. Check your loan letter or key fact statement for the words "fixed" or "variable" and the reset date. The effect of the SBP rate on an EMI is explained step by step for anyone who wants the mechanics.

Bank savings should earn at least 10.5% from 1 November

SBP sets a minimum profit on rupee savings accounts of individuals, kept 0.5 point below the corridor floor. With the floor now 11%, that minimum should rise from 10% to 10.5%, applying from the first day of the next month, 1 November 2026.

SBP's Structure of Interest Rates sheet shows the minimum set 1.5 points below the policy rate at every one of the 13 changes since January 2023. On 28 April 2026 it was 11.5% and 10%. On that pattern the new minimum is 10.5%. SBP had not published the revised sheet when we checked late on 26 October, so treat 10.5% as expected rather than notified. The savings floor rule explains which accounts it covers and the Rs 10 million cap.

On Rs 1,000,000, 10% gives about Rs 8,333 a month before tax and 10.5% about Rs 8,750. After 15% withholding tax for a filer, that is about Rs 7,083 against Rs 7,438. National Savings rates are set separately and last changed on 21 October; see the National Savings profit rates for those.

What to do this week

Borrowers should find their reset date. Savers should check their November statement shows the higher rate. Nobody needs to move money in a hurry, because the savings minimum applies automatically and loan resets follow the dates in each contract.

1. Find your loan's key fact statement and note whether the rate is fixed or KIBOR-linked, and the reset month.
2. Note which KIBOR it uses (1-month, 6-month or 1-year) and the fixing date in your contract.
3. For a savings account, compare the profit credited for November with 10.5% a year on your average balance.
4. If a bank pays an individual less than the minimum on a rupee savings account, complain to the bank first, then to SBP.
5. Mark 14 December 2026, the next MPC meeting, in your diary.

Common questions

What is the SBP policy rate now?

It is 12% from 27 October 2026. The MPC raised it by 0.5 point from 11.5% at its meeting on 26 October 2026.

Why did the SBP raise the interest rate?

Because the war in the Middle East is keeping oil and energy prices high, and inflation of 10.3% in September came in above the MPC's forecast. It wants to stop that spilling into wider price rises.

Will my car loan instalment go up?

Only if it is KIBOR-linked, and only at its next reset date. A fixed-rate loan stays the same.

Will my bank savings account earn more?

The minimum on individual rupee savings accounts should go from 10% to 10.5% from 1 November 2026, on the SBP rule that ties it to the corridor floor. Banks may pay more than the minimum.

When is the next SBP monetary policy meeting?

Monday 14 December 2026, according to the MPC calendar on sbp.org.pk. The minutes of the 26 October meeting are due on 20 November.

Did National Savings rates change with this decision?

Not yet. The current National Savings rates have applied since 21 October 2026, and no new rates had been posted on savings.gov.pk when we checked.

How we verified this

What we checked, where we read it, and what we could not confirm.

We read the Monetary Policy Statement of 26 October 2026, SBP's DMMD Circular No. 04 of 2026, the 26 October KIBOR sheet, the Structure of Interest Rates and the MPC calendar on sbp.org.pk late on 26 October 2026. SBP had not yet published the revised savings minimum or any KIBOR fixing after the decision. The loan figures are our own examples.