The State Bank of Pakistan (SBP) kept its key policy rate unchanged at 10.5 percent on Monday, following its Monetary Policy Committee meeting. Headline inflation stood at 5.6 percent in December 2025, while core inflation remained higher at 7.4 percent. The committee said this decision aims to ensure price stability and support sustainable economic growth.
The MPC noted that the trade deficit widened due to rising imports and falling exports, but remittances and stable global commodity prices helped contain the current account deficit. Real GDP growth for the first quarter of FY2026 was provisionally reported at 3.7 percent, driven by industry and agriculture. Consumer and business confidence also showed signs of improvement.
Read more: SBP simplifies overseas payments for banks
SBP highlighted that forex reserves surpassed $16 billion as of January 16, thanks to ongoing central bank purchases. Analysts had expected a rate cut of 50 to 100 basis points to boost investor confidence, making the decision to hold the rate “a surprise” for some market participants.
The central bank also noted that the IMF slightly upgraded Pakistan’s global growth forecast for FY2026. However, risks remain from global tariff uncertainty and volatile commodity prices. The MPC said inflation and the current account outlook are broadly unchanged.
Read more: SBP injects Rs 2.2tr to maintain liquidity in market
Business leaders had hoped for a sharper rate cut to restore confidence. During the last rate cut, the Karachi Chamber of Commerce said the 50-basis-point reduction was insufficient. SBP’s decision signals caution, balancing stable inflation with efforts to sustain economic growth.