Pakistan raises policy rate to 12 percent as inflation pressures mount
Pakistan’s central bank increased its policy rate by 50 basis points, from 11.5 percent to 12 percent, effective October 27. Nine of ten committee members supported the increase. The bank cited energy and domestic wheat prices after annual inflation reached 10.3 percent in September, above its forecast, and said it aimed to contain further price pressures.
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Half-point rise takes effect on October 27
Pakistan’s central bank raised its policy interest rate by 50 basis points on October 26, taking it from 11.5 percent to 12 percent. The new rate takes effect on October 27. The central bank made the decision amid concerns about inflation and persistently high international energy prices.[1], [2]
Nine of the committee’s ten members supported the increase, while one preferred a larger rise, according to Governor Jameel Ahmed. The bank said it needed to anchor inflation expectations and contain the spread of the supply shock into other prices, with inflation above its forecast in September. The committee described its objective as preserving macroeconomic stability.[1]
Energy and wheat worsen the inflation outlook
Annual consumer inflation reached 10.3 percent in September. The committee pointed to elevated energy prices linked to tensions in the Middle East and higher domestic wheat prices. It judged that these developments had worsened the inflation outlook compared with its earlier assessment, despite previous monetary adjustments and continued fiscal discipline.[1]
The bank’s inflation target range is 5 percent to 7 percent. Its committee said the rate increase was necessary to bring inflation back within that range and limit further effects from food and energy prices. The assessment identified risks from commodity prices, energy tariffs, wheat supply and adverse weather conditions.[1]
Growth forecasts hold as remittance outlook rises
The central bank retained its fiscal 2027 real-growth forecast of 3.5 percent to 4.5 percent and its current-account deficit forecast of 0 percent to 1 percent of gross domestic product. The fiscal 2026 real-growth figure was revised to 3.7 percent. It reported foreign-exchange reserves of 21.5 billion dollars, covering about three months of imports.[1]
Remittances reached about 10.9 billion dollars in the first fiscal quarter. Following those inflows, the bank raised its annual remittance forecast from 44 billion dollars to 45 billion dollars. Its policy assessment also noted a staff-level agreement with the International Monetary Fund (IMF), while identifying elevated external risks around the growth and balance-of-payments outlook.[1]
