Pakistan’s central bank raises key rate to 12% — Dawn

The State Bank of Pakistan on October 26 raised its key interest rate by 50 basis points, from 11.5% to 12%. The decision was made by the regulator’s Monetary Policy Committee, Dawn reports.

Committee vote

State Bank of Pakistan Governor Jameel Ahmad said at a press conference in Karachi that nine of the committee’s 10 members supported the rate increase. One committee member believed that the rate should be raised even further.

According to Ahmad, the factors behind the decision included the inflation outlook, consumer expectations and assessments by other forecasters. The regulator also took into account the impact of global commodity and oil prices on the country’s external sector, as well as trends in remittances and exports.

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Remittance and export estimates

The central bank governor noted a deterioration in the current account since the committee’s previous meeting in September. At the same time, he said the impact of this indicator was expected to remain within the range of zero to 1% of GDP.

The State Bank of Pakistan revised its remittance forecast from $44 billion to $45 billion. Ahmad also reported an improvement in the export trend, but noted that its level still did not meet the economy’s needs. The regulator had previously kept the rate unchanged after raising it by 100 basis points in April.

Since mid-2024, the central bank has cumulatively cut its key rate by 1,050 basis points, from the record 22% recorded in June 2023. This took place amid a sharp slowdown in inflation from multi-year highs.