Pakistan’s central bank is set to hold its next monetary policy meeting on Monday, and the debate ahead of it has split the country’s economic voices into two camps. Bankers and financial market experts are largely expecting interest rates to rise, while traders and industrialists are pressing for a cut. The decision will come from the Monetary Policy Committee of the State Bank of Pakistan, and it arrives at a moment when inflation remains well above the comfort zone for households and businesses alike.
The current policy rate stands at 11.5 percent. That is the benchmark against which banks price much of their lending, so any move up or down has a direct effect on borrowing costs for the government, for companies, and for ordinary borrowers. Ahead of the meeting, most financial experts quoted in market coverage expected a rise of 50 basis points, which would take the rate to 12 percent. Some voices argued for a larger move of 100 basis points, saying a stronger step was needed to bring inflation under control.
The case for a rise rests mainly on price pressures. In the first quarter of fiscal year 2027, consumer price inflation stood at 10.2 percent, compared with 4.3 percent in the same period a year earlier. That sharp increase has been linked in large part to costly oil imports, with tensions in the Middle East pushing up energy costs for an economy that depends heavily on imported fuel. Higher fuel and transport costs tend to feed through into the prices of many other goods, which is why bankers argue that the central bank cannot afford to stand still.
Senior banker Rashid Masood Alam said he was sure of a 50 basis point increase, but added that the market required a 100 basis point rise to tame rising inflation. He also pointed to the risk of further escalation in the Middle East as a factor that could push inflation higher still and strengthen the case for tighter policy. His remarks capture the mood among many in the financial sector, where the fear is that leaving rates unchanged would allow inflation expectations to become entrenched.
Faisal Mamsa, the chief executive of Tresmark, offered a more measured view. He described a 50 basis point rise as a sensible middle ground, enough to acknowledge the changing risks without doing unnecessary damage to growth. A larger rise, in his view, would increase borrowing costs for both the government and the private sector while offering only limited additional benefit over the smaller step. He added that a 50 basis point move could help preserve confidence and monetary stability, even though the longer term challenge facing the economy remains considerably bigger.
On the other side of the argument, industry groups are demanding the opposite course. They want interest rates brought down to single digits in order to bolster economic activity. Saleem Mukati, chairman of the Pakistan Chemicals and Dyes Merchants Association, argued that raising rates simply in the name of controlling inflation would not prove effective and would turn out to be a failed measure. In his view, the burden of such a move is always borne by traders and industrialists, who face higher financing costs while their operating expenses are already rising.
The Korangi Association of Trade and Industry and the SITE Association of Industry made a similar demand, calling for the rate to be brought down to single digits. Their argument is that cheaper borrowing would support production, trade, and employment, and that higher rates risk choking off the very growth the government says it wants to encourage. For these groups, the priority is activity and jobs rather than a faster reduction in inflation.
