The State Bank of Pakistan (SBP) increased its benchmark policy rate by 100 basis points to 11.5% on Monday, adopting a cautious tightening stance amid rising inflation concerns and volatility in global oil prices.
The decision came after a closely contested meeting of the Monetary Policy Committee. According to a Reuters poll, 6 out of 10 analysts had expected the central bank to keep the rate unchanged at 10.5%, while three predicted a 50-basis-point hike and one anticipated a larger 100-basis-point increase.
Pakistan’s Consumer Price Index (CPI) inflation rose to 7.3% year-on-year in March, up from 7% in February, breaching the SBP’s target range of 5% to 7%. Some analysts warn that inflation could approach double digits in the fourth quarter of the fiscal year if external pressures persist.
Oil prices have remained highly volatile due to the Iran-US conflict, keeping global markets unsettled and increasing concerns over Pakistan’s import bill.
The SBP has cut interest rates by a cumulative 1,150 basis points since June 2024, when they peaked at a record 22%. The central bank had last reduced the rate by 50 basis points in January.