State Bank of Pakistan raises policy rate to 12% as inflation pressures mount

The State Bank of Pakistan raised its key policy rate by 50 basis points to 12 per cent on Monday, the second rise since April, as the central bank pointed to a worsening inflation outlook driven by the war’s impact on energy prices.

Governor Jameel Ahmed told a press conference in Karachi that the Monetary Policy Committee had met and reviewed conditions since its September meeting, Dawn reported. He said there were many “underlying factors” behind the decision, especially the inflation outlook, citing the US-Israel war on Iran and its impact on energy and oil prices, developments in the domestic market and their subsequent impact on inflation.

The move lifts the rate from 11.5 per cent, where it had stood since a 100-basis-point increase in April in response to rising global energy prices and supply chain risks. That April rise was the central bank’s first increase in nearly three years.

Before that, the bank had held the rate at 10.5 per cent in January and March after a surprise 50-basis-point cut in December 2025. The State Bank has cut the key rate by a cumulative 1,050 basis points since mid-2024, from a record 22 per cent reached in June 2023, as inflation cooled sharply from multi-decade highs.

Topline Securities said the increase was in line with its expectations. Ahead of the decision, a Topline Securities poll of market participants found 61 per cent expected a rise, with 54 per cent expecting a 50-basis-point hike, Business Recorder reported.

Sources:

• Dawn: https://www.dawn.com/news/2039956
• Business Recorder (preview and poll): https://www.brecorder.com/news/40445969
• Mettis Global / Bloomberg (preview): https://mettisglobal.news/SBP-likely-to-raise-policy-rate-by-50bps-to-12-Bloomberg-64452