KARACHI — The State Bank of Pakistan (SBP) announced on Monday that the policy rate will remain at 11.5%. This decision, by the Monetary Policy Committee (MPC), targets effective management of inflationary pressures in the current economic climate.
Impact of Inflation and Economic Indicators
The MPC noted the rise in headline inflation amidst economic uncertainties influenced by Middle East conflicts. Although global oil prices have eased slightly due to positive geopolitical developments, they are still above pre-conflict levels.
Increases in inflation were especially significant in April and May, with core inflation also on the rise. The committee observed that economic activities are showing signs of moderation.
Assessment of Monetary Policy
The MPC believes that maintaining the current policy rate will guide inflation toward the medium-term target range of 5 to 7%. Although external account pressures remain stable and the macroeconomic outlook unchanged, global developments and rising policy rates by central banks maintain the committee’s cautious stance.
Future Projections and Recommendations
The committee stressed the need for proactive macroeconomic management and structural reforms to enhance economic resilience and growth. They project a real GDP growth of 3.7% for the fiscal year 2026, with a primary balance surplus of 2.5% of GDP.
Furthermore, the committee noted improvements in consumer and business confidence, alongside a rise in SBP’s foreign exchange reserves to $17.2 billion.
