Central bank raises policy rate by 50 basis points to 12pc

On Monday, the State Bank of Pakistan increased its key policy rate by 50 basis points to 12 percent, according to a press conference in Karachi. Governor Jameel Ahmed explained that the Monetary Policy Committee had assessed the situation following their September meeting. Factors behind the decision included the inflation outlook and global events such as the US-Israel war on Iran, which impacted energy and oil prices.

Nine out of ten MPC members voted for the increase, with one member preferring an even higher rate. Ahmed also noted a deterioration in the current account, though its impact remained relatively small at 0-1 percent of GDP. The central bank revised its outlook on remittances from $44 billion to $45 billion and mentioned an improving export trend.

However, imports were estimated to reach approximately $71 billion. Growth expectations were revised downward, with the last quarter of the previous fiscal year now projected at 2 percent, down from 2.9 percent. The central bank had held the rate steady since a 100 basis point increase in April, which was its first hike in nearly three years due to rising global energy prices and supply chain risks.