The State Bank of Pakistan’s new 12% policy rate took effect on Tuesday, 27 October, a day after the Monetary Policy Committee raised the rate by 50 basis points from 11.5%. The State Bank also fixed the overnight interest rate corridor at 200 basis points, with the reverse repo (ceiling) rate at 13% and the repo (floor) rate at 11%.
The decision, backed by nine of the committee’s ten members, was the central bank’s first rate increase since April and followed three meetings at which rates were held unchanged. Governor Jameel Ahmad cited worsening inflation risks from the Middle East conflict, crude oil above $100 a barrel and domestic wheat supply frictions.
September headline inflation stood at 10.3%, well above the bank’s 5-7% target range, while the bank said growth and external account projections were broadly unchanged. For borrowers, the new rate means loans stay costlier for longer; for savers, it keeps returns on deposits relatively attractive while inflation expectations are anchored.
Sources: Business Recorder, Express Tribune. Written in our own words for information only.