# Pakistan raises its policy rate to 12% as the oil shock reaches central banks and airlines

The State Bank of Pakistan made its first increase since April, while carriers from Thailand's Nok Air to JetBlue cut routes or report losses on fuel costs.

- Published: 2026-10-27T05:06:34.199Z
- Canonical: https://polylog.news/2026-10-27/pakistan-raises-its-policy-rate-to-12-as-the-oil-shock-reach
- Publisher: Polylog (Global desk)
- Section: macro
- Sources: [Dawn](https://www.dawn.com/news/2040065/rate-hike-divides-business-community), [The Nation Thailand](https://www.nationthailand.com/business/corporate/40072773), [CNBC Economy](https://www.cnbc.com/2026/10/26/jetblue-jblu-3q-2026-earnings.html)

The State Bank of Pakistan (SBP) [raised its benchmark rate by 50 basis points to 12%](https://tradingeconomics.com/pakistan/interest-rate/news/595028) on Monday, its first increase since April. Nine of the ten members of the Monetary Policy Committee voted for the move, which took effect on October 27. The central bank cited inflation risk from the Middle East conflict and said oil above $100 a barrel threatens second-round effects across the economy. It aims to return inflation to its 5% to 7% target over the medium term.

The decision split opinion in Karachi. [Dawn reports](https://www.dawn.com/news/2040065/rate-hike-divides-business-community) that foreign investors welcomed the increase. Domestic business groups called it counterproductive for stabilization, industrial growth and export competitiveness. Foreign holders of Pakistani debt gain from a higher yield and a central bank that defends the rupee. Local manufacturers pay more to borrow while their energy costs also rise.

Airlines show the same energy shock reaching companies. Thailand's Nok Air [suspended three southern domestic routes from October 27](https://www.nationthailand.com/business/corporate/40072773) because of fuel costs. In the United States, JetBlue Airways [reported a wider quarterly loss on fuel costs](https://www.cnbc.com/2026/10/26/jetblue-jblu-3q-2026-earnings.html). Its chief executive said margins were improving under a plan to cut costs and raise premium revenue.

Interest rates cannot add oil supply. Pakistan raised its rate to protect its currency and its credibility with external creditors, because a country that imports most of its energy cannot let the rupee fall while crude trades above $100.

## What this means

Energy importers with thin reserves face a choice between defending the currency through higher rates and accepting imported inflation through depreciation. Pakistan chose defense, as foreign creditors prefer, at the expense of domestic industry and growth. The pressure runs through import bills and dollar funding. It intensifies if the Fed raises rates in December and the dollar strengthens. Airlines, shipping and fuel-intensive manufacturers in importing countries carry the operating cost. Oil producers and holders of hard currency gain. The precedent is 2022, when emerging-market central banks from Pakistan to Egypt raised rates repeatedly into an energy shock and several still needed International Monetary Fund support. The likelier outcome over the next one to three months is further rate increases by other oil-importing central banks in South and Southeast Asia, and more route cuts by short-haul carriers, if Brent stays above $100. A sustained fall in crude below $100 on Gulf diplomacy would prove that read wrong and give these central banks room to pause.

## What to watch

- The rupee's exchange rate over the next month. Stability would show the rate increase worked, and renewed weakness would point to another increase or a return to IMF talks.
- Rate decisions by other oil-importing central banks in Asia. A cluster of increases would confirm that the oil shock is now driving monetary policy across the region.
- Further route suspensions by budget airlines. Capacity cuts are an early sign that fuel costs are reducing travel demand and regional economic activity.