The State Bank of Pakistan has increased interest rates by 50 basis points in view of rising inflation concerns, after which the policy rate increased from 11.5% to 12%. The new rate will be effective from October 27, 2026.
Governor State Bank Jamil Ahmed informed the media about the decision after the Monetary Policy Committee meeting on Monday. According to him, 9 out of 10 members of the committee supported the increase in interest rates.
The governor said that after the September meeting, the economic situation and inflation prospects were reassessed. During this, inflation concerns increased due to the increase in global energy prices and the cost of wheat in the local market.
According to him, oil prices in the global market remained above $100 per barrel due to geopolitical tensions in the Middle East. High energy prices are likely to increase import costs and pressure on local prices.
The increase in wheat prices over the past two to three months was also considered a key factor in inflation. According to the State Bank, changes in global and local conditions have increased uncertainty about the future trend of inflation.
The challenge of keeping inflation under control
The main objective of increasing interest rates is to keep inflation expectations under control and prevent the effects of rising energy and food prices from spreading to other sectors of the economy.
An increase in the policy rate may make borrowing from banks more expensive, which is likely to affect business investment and consumer spending. However, the central bank is trying to reduce inflationary pressures through this measure.
Economic growth is expected to be 3.5 to 4.5 percent
According to the Governor of the State Bank, Pakistan’s economic growth is estimated to be 3.5 to 4.5 percent in the current fiscal year 2026-27.
He said that there has been some improvement in exports, but their pace is not in line with the needs of the economy. The current account situation and global conditions are also important factors in the economic scenario.
The latest decision of the State Bank shows that the central bank is taking into account the risks of inflation along with the prospects of economic growth. In the coming months, global oil prices, food costs and domestic economic activities will play an important role in determining the direction of monetary policy.
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