The State Bank of Pakistan (SBP) on Monday left its benchmark policy rate unchanged at 11.5 percent, citing easing global oil prices after the recent US-Iran peace agreement while warning that inflation is likely to remain in double digits in the coming months.
“The Monetary Policy Committee (MPC) decided to keep the policy rate unchanged at 11.5% in its meeting today,” the central bank said in its latest monetary policy statement.
The decision comes after the SBP lowered rates significantly over the past year as inflation eased from historic highs. However, recent geopolitical tensions in the Middle East and higher domestic energy costs have pushed inflation upward again.
According to the MPC, global oil prices declined after the US-Iran agreement, although they remain above levels seen before the conflict began earlier this year.
The committee noted that the impact of the Middle East conflict had started to appear in key economic indicators.
Headline inflation rose to 10.9 percent in April and 11.7 percent in May, while core inflation increased to 8.2 percent and 8.7 percent during the same period.
“Moreover, economic activity is showing some signs of moderation, reflecting the impact of elevated prices, austerity measures and prevalent economic uncertainty,” the SBP said.
The central bank added that pressures on Pakistan’s external account remained moderate and the broader macroeconomic outlook was largely unchanged from its previous assessment.
Inflation Risks Remain Despite Economic Stability
The MPC said the current monetary policy stance remained appropriate to guide inflation toward its medium-term target range of 5 to 7 percent.
The committee highlighted several positive developments since its last meeting.
Pakistan Bureau of Statistics estimates showed the economy expanded by 3.7 percent during fiscal year 2025-26, compared with 3.2 percent a year earlier.
Growth was driven mainly by services and industrial activity, while agriculture also contributed to overall expansion.
The MPC also pointed to improved consumer and business confidence and stronger external sector indicators.
SBP foreign exchange reserves reached $17.2 billion by June 5 after successful reviews under the International Monetary Fund’s Extended Fund Facility and Resilience and Sustainability Facility programmes.
The government has estimated a primary budget surplus of 2.5 percent of GDP for FY26 and is targeting a surplus of 2 percent for FY27.
The central bank credited proactive macroeconomic management and fiscal consolidation for helping preserve economic stability during a period of regional uncertainty.
Growth Outlook Positive but Challenges Persist
Despite encouraging indicators, the MPC warned that several risks could affect inflation and growth in the months ahead.
The committee projected inflation would remain in double digits for the next few months before gradually easing.
“This outlook is subject to multiple risks, including geopolitical developments, the extent of pass-through of global prices to domestic fuel prices, magnitude of adjustments in power and gas tariffs, potential fiscal slippages, and uncertain food prices amidst weather-related challenges,” the statement said.
The MPC also cautioned that spillover effects from regional tensions and weaker agricultural prospects could weigh on economic activity.
At the same time, it stressed the importance of accelerating structural reforms to improve productivity, strengthen economic resilience and support sustainable long-term growth.
Analysts said the decision signals the SBP’s preference for maintaining stability while monitoring inflation trends and the economic impact of developments in global energy markets.
