Central bank raises policy rate by 50 basis points to 12pc

The State Bank of Pakistan (SBP) on Monday raised the key policy rate by 50 basis points to 12 per cent.

Addressing a press conference in Karachi, SBP Governor Jameel Ahmed said that the Monetary Policy Committee (MPC) had met and reviewed the situation since the last meeting held in September.

He said that there were many “underlying factors” behind the decision, especially the inflation outlook. He cited the US-Israel war on Iran and its impact on energy and oil prices, developments in the domestic market and the subsequent impact on inflation.

He said that nine out of ten MPC members voted to raise the policy rate, while one member had a different view; they were of the opinion that it should be raised further.

He said that consumer expectations and other forecasters’ views were taken into consideration as well as other macro factors, especially the impact of global commodity and oil prices on the external account and the impact of remittances and export trends.

Topline Securities said the central bank had raised the policy rate “in line with our expectations”.

Previously, the policy rate was 11.5pc. The central bank had held the rate steady since raising it by 100 basis points in April in response to rising global energy prices and supply chain risks — its first increase in nearly three years.

The SBP has cut the key rate by a cumulative 1,050 basis points since mid-2024, from a record 22pc reached in June 2023, as inflation cooled sharply from multi-decade highs.

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