- Decision
- Maintain
- Rate change
- 0 bps
- policy rate
- 11%
The Monetary Policy Committee of the State Bank of Pakistan kept the policy rate at 11 percent on 30 July 2025, judging the real rate to be “adequately positive” after headline inflation eased to 3.2 percent y/y in June but with gas-tariff hikes and global commodity volatility seen tempering the outlook, even as inflation is still expected to stay largely within the 5–7 percent target band. The stance follows cumulative 200 bp of cuts since January, including reductions of 100 bp each in January and May. The central bank said it has stepped up liquidity injections to keep the interbank overnight repo rate aligned with the policy rate. It projects FY26 real GDP growth at 3.25–4.25 percent, up from a provisional 2.7 percent in FY25, supported by 12.8 percent y/y growth in private-sector credit and a rebound in manufacturing. Externally, a FY25 current-account surplus of USD 2.1 billion (0.5 percent of GDP) and improved official inflows have lifted foreign-exchange reserves above USD 14 billion, with a further rise to USD 15.5 billion expected by end-December despite a widening trade deficit. The MPC highlighted volatile oil and rising metal prices and uncertain global trade conditions as key external risks, and stressed that a continued prudent monetary-fiscal mix and structural reforms are needed to safeguard price stability and sustainable growth.
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.