State Bank of Pakistan Raises Interest Rate to 12% in First Hike Since June

State Bank of Pakistan Raises Interest Rate to 12% in First Hike Since June

The State Bank of Pakistan has raised its benchmark policy rate by 50 basis points to 12 percent, its first increase since June 2026, after holding the rate at 11.5 percent for three straight meetings. The Monetary Policy Committee's decision, taken on 26 October and effective from 27 October, was backed by nine of its ten members, with one member favouring an even larger move.

Governor Jameel Ahmad said the inflation outlook had deteriorated significantly because of the ongoing geopolitical crisis, including the US-Iran conflict, and developments in the Middle East. International crude oil prices have stayed stubbornly above $100 a barrel, while domestic wheat prices have also risen over the past two to three months, pushing September headline inflation to 10.3 percent.

The central bank said the tightening was needed to anchor inflation expectations, prevent second-round price effects and steer inflation back toward its medium-term target range of 5 to 7 percent. It also warned that higher global commodity and oil prices are pressuring Pakistan's external account, with the current account deficit now expected to land between zero and 1 percent of GDP. The new rate will remain in effect for the next six weeks.

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