State Bank of Pakistan Maintains Policy Rate

The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) convened on Wednesday and resolved to maintain the policy rate at 11%.

SBP Governor Jameel Ahmad announced the MPC’s decision to hold the policy rate steady at 11% during a press briefing.

The MPC had previously decided to keep the policy rate unchanged at 11% during its meeting on June 16, 2025, due to anticipations of increasing inflation in the months ahead.

However, financial analysts had projected that the central bank would implement a reduction of at least 50 basis points (bps) during today’s session.

Topline Securities had indicated in an earlier assessment that they anticipated the central bank to reveal a 50bps decrease in the approaching MPC meeting.

The brokerage firm suggested that the SBP possessed additional capacity for approximately a 100bps cut, projecting an average inflation rate between 5-7% for FY26, resulting in a real rate of 400-600bps.

Analysts from Arif Habib Limited (AHL) also foresaw the MPC lowering the policy rate to 10.5%.

AHL stated that considering decreased inflation, a stable external position, and declining yields, conditions appear conducive for additional monetary easing, although certain risks exist.

Similarly, a Reuters survey indicated expectations that the SBP would reduce its key interest rate by 50bps to 10.5%, with a consensus anticipating further easing as inflation decelerates and external balances improve.

Ahmed Mobeen, a Senior Economist at S&P Global Market Intelligence, suggested that the SBP would likely continue to lower rates but might proceed more cautiously in the latter half of the year due to increased import demand and global commodity uncertainties.

Previous MPC Meeting

During its June assembly, the MPC resolved to maintain the policy rate at 11%, aligning with market predictions.

The committee acknowledged at that time that the increase in inflation to 3.5% year-on-year (y/y) in May aligned with its forecasts, while core inflation experienced a slight decrease.

It communicated expectations for inflation to rise and stabilize within the target range during FY26.

The MPC further assessed that economic expansion was progressively gaining momentum and projected further gains in the coming year, supported by the ongoing consequences of prior policy rate adjustments.

Significant economic developments have transpired since the previous MPC meeting.

The rupee’s value has increased by 0.04%, while petrol costs have risen by 5.3%.

Globally, oil prices have fallen by nearly 4% since the last MPC, hovering around $69 per barrel.

Pakistan’s headline inflation was recorded at 3.2% on a year-on-year (YoY) basis in June 2025, lower than the 3.5% recorded in May 2025, according to data from the Pakistan Bureau of Statistics (PBS).

Additionally, Pakistan’s current account (C/A) exhibited a substantial surplus of $2.1 billion during the fiscal year (FY) 2024-25, contrasting sharply with the $2.07 billion deficit reported in FY24, according to SBP data.

Foreign exchange reserves held by the SBP decreased by $69 million on a weekly basis, registering at $14.46 billion as of July 18.

The nation’s total liquid foreign reserves amounted to $19.92 billion. Net foreign reserves held by commercial banks were reported at $5.46 billion.