October 27, 2026, following the Monetary Policy Committee’s decision announced on October 26.
Updated SBP Policy and Repo Rates
Under the latest notification, the SBP has revised its policy rate and overnight lending facilities as follows:
| Interest Rate | Previous Rate | New Rate |
|---|---|---|
| SBP policy rate | 11.50% | 12.00% |
| Overnight reverse repo ceiling | 12.50% | 13.00% |
| Overnight repo floor | 10.50% | 11.00% |
The central bank has maintained a 200-basis-point interest rate corridor, with the ceiling set one percentage point above the policy rate and the floor one percentage point below it.
Why Has the State Bank Increased the Policy Rate?
The Monetary Policy Committee cited elevated energy prices, geopolitical tensions in the Middle East and a worsening inflation outlook as key concerns behind its decision.
According to the committee, the rate increase is intended to keep inflation expectations under control, limit the secondary effects of supply shocks and help bring inflation within the government’s medium-term target range of 5% to 7%. Nine of the committee’s ten members supported the increase.
What Do Repo and Reverse Repo Rates Mean?
The policy rate is the central bank’s main tool for influencing interest rates and economic activity. The overnight repo and reverse repo facilities help manage liquidity in the banking system and keep short-term money market rates close to the policy rate.
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Policy rate: Signals the SBP’s monetary policy stance and influences borrowing costs across the economy.
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Repo floor: The lower boundary of the interest rate corridor, helping guide overnight market rates.
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Reverse repo ceiling: The upper boundary of the corridor, helping limit fluctuations in overnight rates.
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Impact on Borrowers, Businesses and Inflation
The increase may put upward pressure on borrowing costs for businesses and consumers, depending on how banks adjust their lending rates. Companies that rely on bank financing could face higher financing expenses, while individuals with variable-rate loans may also be affected.
Higher interest rates can help reduce inflationary pressure by moderating borrowing and spending. However, the full effect of monetary policy typically takes time to pass through the economy. The SBP says its policy decisions are aimed primarily at maintaining domestic price stability.
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