The State Bank of Pakistan’s Monetary Policy Committee (MPC) on Monday left its benchmark policy rate unchanged at 11.5%, noting a recent decline in global oil prices following a US-Iran deal.
“The Monetary Policy Committee (MPC) decided to keep the policy rate unchanged at 11.5% in its meeting,” the central bank said in a statement.
During the meeting, the MPC noted that global oil prices had eased after the recent US-Iran deal, although they remained higher than pre-conflict levels.
It added that the impact of the Middle East conflict was now visible in economic indicators, with headline inflation rising into double digits in April and May, while core inflation also edged higher.
“Moreover, economic activity is showing some signs of moderation, reflecting the impact of elevated prices, austerity measures and prevalent economic uncertainty,” the central bank said.
It said that pressures on the external account remained moderate and the broader macroeconomic outlook was largely unchanged from its previous assessment.
In this context, the MPC said that the current monetary policy stance remained appropriate to steer inflation towards its medium-term target range of 5% to 7%.
The committee highlighted several developments since its last meeting, including a provisional estimate of 3.7% real GDP growth for the fiscal year 2026 by the Pakistan Bureau of Statistics, an improvement in consumer and business confidence, and a rise in SBP’s foreign exchange reserves to $17.2 billion as of June 5 following successful reviews under the International Monetary Fund’s Extended Fund Facility and Resilience and Sustainability Facility programmes.
Additionally, the government has estimated primary balance surplus for FY26 at 2.5% of GDP and is targeting a surplus of 2% of GDP for FY27, it said.
According to the central bank, the Middle East conflict has begun to impact macroeconomic conditions in many economies, and a rising number of central banks have started to raise their policy rates.
The SBP said that proactive macroeconomic management and fiscal consolidation had helped preserve economic stability despite the prolonged Middle East conflict.
It reiterated the need to accelerate structural reforms to improve resilience, raise productivity and support sustainable economic growth.
On macroeconomic indicators, the MPC noted that headline inflation rose from 7.3% in March to 10.9% in April and 11.7% in May.
The MPC said the increase reflected both the direct impact of higher domestic energy prices linked to the Middle East conflict and indirect effects through transportation and production costs.
The development contributed to an increase in core inflation to 8.2% in April and 8.7% in May, it added.
The MPC projected inflation to remain in double digits for the next few months, before gradually easing subsequently.
“This outlook is subject to multiple risks, including geopolitical developments, the extent of pass-through of global prices to domestic fuel prices, magnitude of adjustments in power and gas tariffs, potential fiscal slippages, and uncertain food prices amidst weather-related challenges,” it said.
Citing PBS estimates, the MPC said that Pakistan’s economy expanded by 3.7% in FY26, compared with 3.2% a year earlier.
It added that growth was led by the services and industrial sectors, while agriculture also made a meaningful contribution.
However, it warned that spillover effects from the regional conflict and weaker agricultural prospects could weigh on growth in the coming months.