- Decision
- Maintain
- Rate change
- 0 bps
- policy rate
- 11%
The Monetary Policy Committee of the State Bank of Pakistan kept the policy rate unchanged at 11 percent at its 16 June 2025 meeting, judging the existing real interest rate sufficient to anchor inflation, which rose to 3.5 percent y/y in May as expected while core inflation edged lower, against a backdrop of gradually improving growth and moderating inflation expectations. After two 100-bp cuts in January and May, the rate now stands at 11 percent. The central bank will continue liquidity injections to keep the overnight repo rate aligned with the policy rate. Headline inflation is projected to inch up but stabilise within the 5–7 percent target range during FY26, while provisional FY25 GDP growth is 2.7 percent and is forecast to quicken next year on the back of robust private-sector credit growth of about 11 percent. Externally, a widening trade deficit is eroding the current account surplus, FX reserves have risen to USD 11.7 bn on IMF disbursements and are expected to reach USD 14 bn by end-June, yet weak financial inflows and higher import demand pose risks. The statement highlights sharply rebounding global oil prices amid Middle-East tensions and easing US-China trade frictions. The MPC stressed timely foreign inflows, targeted fiscal consolidation and structural reforms as prerequisites for preserving macroeconomic and price stability.
Rate evolution
The State Bank of Pakistan’s policy rate rose by a net 50 basis points over the period, moving from a prolonged hold at 11 percent to a 50 basis point cut in December 2025, a reversal to 11.5 percent in April 2026 and holds at that level in June, July and September. Through October 2025, the Monetary Policy Committee held at 11 percent as inflation stayed moderate and core inflation eased, even as activity recovered and it flagged widening trade deficits, weak inflows, energy-price risks, commodities and flood-related shocks. The December cut reflected inflation averaging within the 5 to 7 percent target range, relatively benign commodity prices and anchored expectations, with the Committee seeing room to support sustainable growth despite sticky core inflation and a difficult export environment.
It held at 10.5 percent in early 2026 as stronger domestic momentum met higher geopolitical uncertainty over energy costs and supply disruptions, before raising the rate by 100 basis points in April to keep expectations anchored and contain second-round effects after inflation and core inflation rose, with inflation projected to stay above the 5 to 7 percent range for most of FY27. The Committee held the policy rate at 11.5 percent on June 15, judging the stance appropriate to guide inflation towards the target range over the medium term, and again on July 27 as lower global oil prices, moderating inflation and contained external pressures improved the outlook, though renewed regional conflict kept risks elevated. On September 14, it maintained the rate at 11.5 percent as headline inflation rose to 11.1 percent in August from 9.2 percent in July, global commodity prices increased and supply disruptions persisted amid the intensifying Middle East conflict, while external pressures remained contained and activity began to recover, with the Committee judging the stance appropriate despite increased uncertainty.