By Bilal Hussain (News) Pakistan raised its benchmark interest rate on Monday as policymakers prioritized curbing inflation stoked by the Middle East conflict over supporting a slowing economy.

The State Bank of Pakistan raised the target rate by 50 basis points to 12%. The move was broadly expected, with 13 of 18 economists surveyed by Bloomberg forecasting an increase of between 50 and 100 basis points, while five predicted no change.

“The inflation outlook was carefully reviewed,” Governor Jameel Ahmad said at a press briefing in Karachi following the decision. The outlook had deteriorated significantly since the last meeting, particularly because of the US-Iran conflict, with oil prices above $100 a barrel and wheat prices also rising. Those pressures would take time to dissipate, delaying inflation’s return to the central bank’s target, he said.

The move marks Pakistan’s first rate increase since April. The South Asian nation remains particularly vulnerable given its heavy reliance on imported energy. Consumer-price growth has remained above the central bank’s 5%-7% target range for the past seven months.

Ahmad said the central bank was concerned about second-round effects, as higher energy and food costs risk spreading to prices more broadly across the economy.

Higher oil prices have also weighed on economic growth. Pakistan’s economy grew less than expected in the final quarter of the fiscal year through June, signaling the recovery was losing momentum.

Still, the broader economic outlook has improved in recent months, prompting Moody’s Ratings and S&P Global Ratings to upgrade Pakistan’s sovereign credit rating.