SBP holds interest rate at 10.5% amid rising oil prices and inflation concerns

The State Bank of Pakistan (SBP) announced on Monday that its Monetary Policy Committee (MPC) has decided to keep the key interest rate unchanged at 10.5%. “The Monetary Policy Committee has decided to keep the policy rate unchanged at 10.5%,” the SBP said on its website, adding that a detailed statement would be released soon.

Since mid-2024, the SBP has cut the key rate by a total of 1,150 basis points, down from a record 22% in 2023, as inflation slowed sharply from multi-decade highs.

Rising tensions in the Middle East have raised concerns about disruptions to shipping through the Strait of Hormuz, a major route for global oil supplies. This has pushed energy prices higher, which affects Pakistan because the country imports most of its energy needs.

On Friday, the federal government increased petrol and diesel prices by about 20% due to higher oil costs caused by the conflict in Iran. The new price of petrol is Rs321.17 per litre, up from Rs266.17, while diesel has been increased to Rs335.86 per litre from Rs280.86.

SBP Governor Jameel Ahmad has said that Pakistan’s economy could grow 3.75%–4.75% in FY26, supported by stronger domestic demand and earlier monetary easing. However, inflation may temporarily exceed the central bank’s 5%–7% target range before easing.

Pakistan is also part of an ongoing $7 billion IMF programme, with the Fund urging policymakers to maintain tight, data-driven monetary policy to manage inflation expectations and strengthen external financial buffers.