KARACHI: The State Bank of Pakistan (SBP) has decided to keep its policy rate unchanged at 11.5%, citing an improving macroeconomic outlook while warning that ongoing geopolitical tensions and global commodity price volatility continue to pose risks to inflation and economic stability.
The decision was announced on Monday following a meeting of the Monetary Policy Committee (MPC), which said the current monetary stance remains appropriate to guide inflation toward the medium-term target range of 5% to 7% while supporting sustainable economic growth.
According to the SBP, headline inflation eased to 11.1% year-on-year in June, down from 11.7% in May, while core inflation also moderated to 8.4%. The central bank noted that high-frequency indicators pointed to a recovery in economic activity during June after a slowdown in the final quarter of FY2025-26.
The MPC stated that proactive monetary policy, fiscal consolidation, and prudent economic management have helped absorb supply-side shocks and maintain macroeconomic stability despite renewed uncertainty stemming from the Middle East conflict.
The central bank also highlighted several positive economic developments since its last policy meeting. These include foreign exchange reserves exceeding the end-June target of $18 billion, Pakistan’s sovereign credit rating upgrade to “B” by Standard & Poor’s, easing inflation expectations among businesses and consumers, and the Federal Board of Revenue (FBR) achieving its revised tax collection target for FY2025-26.
SBP expects Pakistan’s economy to grow between 3.5% and 4.5% during FY2026-27, supported by improved agricultural output, budgetary incentives, tariff rationalization, and stronger private-sector credit demand.
During a post-policy press conference, SBP Governor Jameel Ahmed said inflation had remained within the lower end of the central bank’s target during the first half of the year before rising due to higher international oil prices and increased shipping costs caused by the Middle East conflict.
He added that inflation is expected to decline gradually after September, while workers’ remittances are projected to rise from $41.6 billion in the previous fiscal year to around $44 billion this year. The governor also expressed confidence that Pakistan’s external position and foreign exchange reserves will continue to strengthen, provided global economic conditions remain stable.
