Pakistan’s central bank, the State Bank of Pakistan (SBP), raises its key policy rate by 50 basis points to 12%, citing persistently high inflation and energy costs linked to Middle East conflict.
SBP says the Monetary Policy Committee (MPC) considers the intensification of the Middle East conflict and low near-term prospects for resolution as keeping global energy prices elevated. It adds that while the shock’s impact on the domestic economy has been contained so far, geopolitical developments worsen the inflation outlook and increase risks to the external account and growth, even as both are broadly unchanged.
At a press conference, SBP Governor Jameel Ahmed attributes the decision to “underlying factors” focused on the inflation outlook, including the US-Israel war on Iran and its effect on energy and oil prices, along with domestic market developments. Sources also note the MPC’s decision is backed by a majority, with nine out of ten members voting for the hike, and one member favoring a further increase.
