Pakistan Raises Interest Rate by 50 Basis Points to 12% as Oil Tops $100 a Barrel
Key Facts
The State Bank of Pakistan raised its policy rate by 50 basis points to 12% on October 26, 2026, its first increase since April, according to coverage by the Express Tribune and a Reuters report published via Investing.com. The decision followed comments by Governor Jameel Ahmad that global crude oil prices had topped $100 a barrel, putting pressure on inflation and external accounts. Nine of the Monetary Policy Committee’s 10 members voted in favor of the increase, according to Aaj English TV. The decision puts borrowing costs at the forefront of the central bank’s tools for addressing energy pressures, while the latest price data showed a slowdown in annual headline inflation. But the index rose month on month, and wholesale price inflation accelerated, keeping price pressures evident across multiple readings.
Pakistan Bureau of Statistics data showed headline inflation at 10.3% year on year in September 2026, compared with 11.1% in August and 5.8% in September 2025. Month on month, the index rose 1.3% in September, pointing to a different trend from the annual decline. In the detailed statement on the national index, prices recorded a monthly increase of 1.27% and an annual rise of 10.26% compared with September 2025. The figures show that the annual pace of inflation eased from the previous month but remained above its level a year earlier, while prices continued to rise during the month. Meanwhile, the wholesale price index rose 13.3% year on year in September, up from 11.8% in August, and increased 1.9% month on month, according to the bureau’s monthly review.
Price component data show annual increases in groups linked to energy and transport. The housing, water, electricity, gas and fuel group rose 12.39% in September, while the transport index climbed 27.43% year on year, according to the statistics bureau. These readings came alongside the governor’s indication that oil had topped $100 a barrel, a threshold he said had put pressure on inflation and external accounts. In its coverage of the press conference, Aaj linked higher oil prices to pressure on inflation and an impact on external accounts, while reporting that inflation concerns were tied to the conflict in the Middle East. These factors provide context for the rate increase, as energy costs coincided with higher transport prices in September data. The rise in the wholesale index both annually and monthly also showed that price pressures persisted before potentially feeding into other indicators.
October’s decision was the first rate increase since April, according to a Reuters report published via Investing.com, and came after annual headline inflation stood at 11.1% in August before easing to 10.3% in September. The annual comparison alone, however, does not reflect the course of prices during the month: headline inflation rose 1.3% month on month, and the monthly increase in the national index was 1.27%. Wholesale price inflation also rose from 11.8% to 13.3% between August and September. Thus, the slowdown in annual inflation coincided with monthly increases in consumer and wholesale prices, as well as sharp rises in transport and the housing and energy group. In this context, 9 of the 10 Monetary Policy Committee members backed a policy rate increase, according to Aaj’s coverage of the October 26 meeting.