SBP keeps policy rate unchanged at 11.5 per cent

KARACHI: The central bank kept its benchmark interest rate unchanged at 11.50 per cent on Monday, opting for a cautious pause in the final monetary policy review of the fiscal year as it weighs easing geopolitical tensions against lingering global oil price volatility.

The decision by the State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC) to maintain the policy rate for the next six weeks follows a 100-basis-point hike in its previous meeting on April 27, which had pushed the borrowing rate to its current level.

“The decision to keep the policy rate unchanged was made in light of the current economic situation and prevailing uncertainties in global markets,” the central bank said in its monetary policy statement.

The SBP noted that while strong prospects of peace in the Middle East have significantly reduced fears of a prolonged regional conflict and helped stabilize disrupted global supply chains over the past month, a cautious stance remains vital. The committee emphasized that the impact of crude oil price fluctuations on domestic inflation continues to be a primary concern, meaning inflationary risks have not been entirely neutralized.

The central bank’s conservative approach aligned closely with financial market expectations. Analysts and sector participants noted that while the grounds for another rate hike had largely evaporated due to stabilizing global commodities, the macro-environment did not yet justify a rate cut.

“Before deciding on rates, the MPC had to assess several factors, including currency stability and the external account,” said Faisal Mamsa, chief executive officer of financial terminal Tresmark, speaking before the announcement.

The pause concludes a turbulent fiscal year 2025-26, during which the central bank was forced to aggressively adjust its monetary toolkit to defend the domestic currency and counter external supply shocks triggered by conflict in the Gulf.

The SBP stated that its future policy trajectory will remain data-driven, closely monitoring consumer price indices, global energy trends, and overall macroeconomic stability before its next scheduled review in late July.