The State Bank of Pakistan (SBP) raised its benchmark policy rate by 100 basis points (bps) to 11.5% on Monday, opting for cautious tightening as oil price volatility and renewed inflation risks clouded the economic outlook.
The move came as the Monetary Policy Committee faced a finely balanced decision. ONE Reuters poll had shown that six out of 10 analysts expected the central bank to keep interest rates unchanged at 10.5%, while three predicted a 50 basis point increase and one expected a larger increase of 100 basis points.
Pakistan’s CPI inflation rose to 7.3% year-on-year in March from 7% in February, breaching the SBP’s target range of 5%-7%. Some analysts warned that inflation could move towards 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 on edge and raising concerns about 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 22%, and most recently cut rates by 50 basis points in January.
