KARACHI: The State Bank of Pakistan has increased the policy rate by 50 basis points in view of rising inflation fears, after which the interest rate has increased from 11.5 percent to 12 percent. This decision will be effective from October 27, 2026.
Governor State Bank Jamil Ahmed told the media after the Monetary Policy Committee meeting in Karachi that 9 out of 10 members of the committee supported the interest rate hike, while one member was of the opinion of increasing it more.
He said that the economic conditions have changed since the last meeting and the inflation scenario has become more challenging than before.
According to the Governor State Bank, oil and energy prices in the global market have remained high due to the ongoing tension in the Middle East. The increase in crude oil prices can lead to an increase in inflation and external payment pressure for a country like Pakistan that depends on imported energy.
He also considered the recent increase in wheat prices as one of the main factors of inflation. According to him, the impact of the increase in energy and food prices can have an impact on overall prices.
In its decision, the Monetary Policy Committee of the State Bank said that the annual inflation rate in September was higher than expected, at about 10.3 percent. The central bank’s medium-term inflation target is 5 to 7 percent.
According to the committee, the aim of the interest rate hike is to contain inflation expectations, limit the impact of the second round of energy and food price hikes and bring inflation towards the target.
Jamil Ahmed said that Pakistan’s economic growth is expected to be 3.5 to 4.5 percent during the fiscal year 2026-27. He said that there are signs of improvement in exports, but their level is not in line with the needs of the economy.
The increase in interest rates may increase the cost of borrowing, while it is also likely to affect business investment, consumer spending and economic activity. Along with this, the central bank expects that a tight monetary policy will help reduce inflationary pressures.
The pace of inflation, global energy prices and the regional situation will be important factors for the State Bank’s future policy in the coming months.
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