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. A Reuters poll had shown that six of 10 analysts expected the central bank to keep the rate unchanged at 10.5%, while three forecast a 50-basis-point hike and one expected a larger 100-basis-point increase.
Pakistan’s CPI inflation quickened to 7.3% year-on-year in March from 7% in February, breaching the SBP’s 5%–7% target range. Some analysts warned that inflation could move towards double digits in the fourth quarter of the fiscal year if external pressures persisted.
Oil prices have remained volatile due to the Iran-US conflict, keeping global markets on edge 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 22%, and last reduced the rate by 50 basis points in January.
