SBP hikes policy rate to 12% on inflation, energy price worries

The State Bank of Pakistan (SBP) Monetary Policy Committee (MPC) increased the policy rate by 50 basis points to 12% in response to deteriorating inflation and energy price concerns. Governor Jameel Ahmad cited the US-Iran conflict and Middle East developments as well as rising energy prices, particularly oil staying above $100 per barrel, as key factors for the hike.

Nine out of 10 MPC members voted in favor of the rate increase. The previous meeting on September 14 had left the rate unchanged at 11.5%. While headline inflation rose to 11.1% year-over-year in August, core inflation remained slightly lower than expected. Analysts had anticipated a rate hike due to ongoing uncertainty and its impact on energy supply chains.

However, some, like the Pakistan Institute of Development Economics, urged the bank to maintain the status quo, citing mixed macroeconomic conditions and moderate inflation moderation.