First interest rate increase from the Central Bank of Pakistan since April

The Central Bank of Pakistan increased its target interest rate by 50 basis points to 12 percent, in line with the forecast of the majority of economists surveyed by Bloomberg. This action of the bank was the first interest rate increase in Pakistan since April.

Central Bank Governor Jameel Ahmad said, "The inflation outlook was carefully evaluated" at the press conference he held in Karachi after the decision. Ahmad stated that the outlook has worsened significantly since the last meeting, especially due to the US-Iran conflict, oil prices have risen above $100 per barrel and wheat prices have also increased, and noted that it will take time for these pressures to disappear and inflation will be delayed to return to the central bank's target.

Pakistan is particularly vulnerable to an energy shock due to its heavy dependence on imports. The increase in consumer prices, at 10.3 percent, has been above the central bank's 5-7 percent target range for the last seven months.

Despite this, there has been an improvement in the general economic outlook in recent months and Moody's and S&P Global upgraded Pakistan's country credit rating.