The State Bank of Pakistan (SBP) on Monday raised its policy rate by 100 basis points (bps) to 11.5%, opting for a cautious tightening as volatile oil prices and renewed inflation risks have dampened the economic outlook.
The move comes as the Monetary Policy Committee faced a delicately balanced decision. A Reuters A poll had shown that six in ten analysts expected the central bank to keep the rate unchanged at 10.5%, while three predicted a 50 basis point hike and one expected a larger increase of 100 basis points.
Pakistan’s CPI inflation accelerated to 7.3% year-on-year in March from 7% in February, surpassing the SBP’s 5-7% target range. Some analysts have warned that inflation could reach double digits in the fourth quarter of the fiscal year if external pressures persist.
Oil prices have remained volatile due to the Iran-US conflict, keeping global markets tense and raising concerns over Pakistan’s import bill.
The SBP has cut rates by a cumulative 1,150 basis points since June 2024, when they peaked at a record low of 22%, and last cut the rate by 50 basis points in January.
