SBP chief defends high interest rates amid global, domestic risks

Governor State Bank of Pakistan (SBP) Jameel Ahmad said the central bank is maintaining a tight monetary stance despite the recent decline in inflation, cautioning that ‘preemptive actions’ remain necessary in view of persistent global uncertainties and potential domestic pressures.

“The actions of the central bank should be proactive, timely and highly effective to enable it to achieve the ultimate objective,” said Jameel, while addressing the AlUla Conference for Emerging Market Economies on Sunday.

He said the most difficult part of the central bank’s job is taking preemptive actions.

The central bank chief noted that Pakistan’s inflation rate has remained low, even below the central bank target of 5-7%, in recent months.

“We are keeping the interest rates, which are at a much higher level; there is a high real effective interest rate. So the question will come why we are keeping a high interest rate and not supporting growth and businesses.

“But many stakeholders will not know what is going to come, because there are many anticipated global developments and also local developments, which may impact inflation and ultimately this high real interest rate, which looks high may not be there down the line,” he said.

The governor admitted that it is difficult for the central bank, sometimes, to convince stakeholders, particularly the economic agents, to “buy into the idea” that interest rates are being kept high because of the reason that “something is going to come and we will have to deal with that situation.”

Last month, the SBP decided to keep its benchmark policy rate unchanged at 10.5% in its first Monetary Policy Committee (MPC) meeting of 2026.

The decision was against market expectations, which anticipated a cut in the key interest rate.

Meanwhile, Jameel noted that due to the policies implemented, the central bank has managed to regain its credibility.

“Look at the professional analysts, all of them are saying that inflation for this year will stay within 5-7% and next year as well. So this is the credibility that what we are saying the market is believing in,” he said.