Economic Stakeholders Anticipate Interest Rate Hike Amid Inflation Surge

KARACHI: Economic stakeholders are urging the State Bank of Pakistan (SBP) to implement a significant interest rate hike of 50 to 100 basis points in response to rising inflation driven by escalating oil import costs linked to the ongoing conflict in the Middle East.

The SBP’s Monetary Policy Committee is set to convene on Monday, with financial markets rife with speculation. Most analysts predict a 50 basis points increase is likely, given the current policy rate of 11.5 percent. Senior banker Rashid Masood Alam expressed confidence in a 50bps hike but emphasized that a 100bps increase may be necessary to effectively combat inflation.

With the Consumer Price Index (CPI) inflation soaring to 10.2 percent in the first quarter of FY27, up from 4.3 percent, the implications of these potential rate hikes are significant for the economy. Alam noted that the looming threat of US military action against Iran could further exacerbate inflationary pressures, compelling the central bank to act decisively.

As the SBP prepares for its upcoming meeting, the focus remains on how these monetary policy decisions will influence economic growth and stability in Pakistan. Stakeholders are keenly awaiting the central bank’s response to the prevailing economic challenges.