State Bank of Pakistan faces dilemma over policy rate amid rising inflation and oil price shock
The State Bank of Pakistan is weighing whether to keep its policy rate at 11.5% or raise it as inflation climbs and global fuel costs surge due to the Gulf conflict.
Pakistan’s State Bank raised its policy rate by 100 basis points to 11.5% on April 27 in response to higher global energy prices and supply-chain risks. With the Gulf war extending into the Red Sea, oil prices have surged past $100 a barrel, intensifying inflationary pressures domestically. Trade and industry groups consider one outlet rate elevated relative to regional peers, while some market participants predict the Monetary Policy Committee may add another 50 basis points at its September meeting.
Others, including Bloomberg Economics and BMI, expect the bank to hold rates steady but acknowledge upward pressure building. A recent Tresmark poll indicated a small share of institutional traders foresee a hike, and senior market commentator Faisal Mamsa warned the bank may need to react to worldwide inflation trends rather than solely domestic factors.
Why it matters
The rate decision will shape borrowing costs, inflation control, and overall economic stability in Pakistan.
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