The State Bank of Pakistan (SBP) has raised its policy interest rate by 50 basis points, from 11.5% to 12%, citing rising inflationary pressures. Announcing the monetary policy decision, SBP Governor Jameel Ahmad said nine of the 10 members of the Monetary Policy Committee (MPC) approved the increase. The governor noted that rising oil prices had contributed to inflationary pressures, prompting the central bank to raise the policy rate by 0.5 percentage points.
Governor Jameel Ahmed said multiple underlying factors, particularly the inflation outlook, prompted the central bank to raise its policy interest rate by 50 basis points to 12%. Addressing a press conference following the monetary policy announcement, Ahmed cited the US-Israel war on Iran and its impact on global energy and oil prices, developments in the domestic market, and their subsequent effects on inflation.
He said nine of the 10 members of the Monetary Policy Committee (MPC) voted in favour of the rate increase, while one member held a different view and believed the policy rate should be raised further. The governor said the committee had also considered consumer expectations, forecasts by other economic observers, and broader macroeconomic factors. These included the impact of global commodity and oil prices on the external account, as well as trends in remittances and exports.
Ahmed acknowledged that the current account position had deteriorated since the previous MPC meeting. However, he said the impact remained limited, amounting to between zero and one per cent of gross domestic product (GDP), and was expected to remain within that range.
The SBP governor also revised the central bank’s remittance forecast upward from $44 billion to $45 billion. He said export trends were improving but remained below the level required to meet the economy’s needs. Meanwhile, the bank estimated imports at around $71 billion.
