Pakistan's central bank raised its key policy rate by 50 basis points to 12% on Monday, Reuters reported, its first increase since April as inflation fuelled by high energy costs due to the Gulf conflict remained above target.

Source: Reuters via Devdiscourse, Oct 26

The State Bank of Pakistan's Monetary Policy Committee said geopolitical developments had worsened the inflation outlook, and that the hike was necessary to keep inflation expectations anchored, contain second-round effects of the supply shock, and bring inflation within its 5-7% target range, Reuters reported.

SBP Governor Jameel Ahmad said it would take longer than planned for inflation to get within the target range, and revised GDP growth to 3.7% for the fiscal year ending June 30, 2027, according to Reuters. Annual inflation eased to 10.3% in September from 11.1% in August, but stayed above target.

The News reported that Ahmad announced the decision at a press conference in Karachi, said petroleum product prices had remained above $100, and said nine of the MPC's 10 members voted in favour of raising the rate. The News said growth was projected at 3.5%-4.5%, exports at $32.5 billion and workers' remittances at $45 billion.

Source: The News International, Oct 26

Reuters noted the IMF urged Pakistan this month to maintain sufficiently tight monetary policy, and that Pakistan reached a staff-level agreement with the IMF on October 7 that could unlock about $1.21 billion, subject to executive board approval. Yaani: $1.21 billion is about $121 crore in dollar terms — a large support package whose release still depends on IMF board approval.