KARACHI – The Monetary Policy Committee (MPC) of the State Bank of Pakistan has decided to keep the policy rate unchanged at 11 percent in its meeting on Wednesday.

The Committee noted that inflation in June 2025 decelerated to 3.2 percent y/y, led mainly by lower food prices, whereas core inflation also declined slightly.

However, the Committee noted that the inflation outlook has somewhat worsened in the wake of higher than anticipated adjustment in energy prices, especially gas tariffs. Nonetheless, inflation is projected to stabilize in the target range going forward.

Moreover, economic activity is gaining further traction amidst the still-unfolding impact of the earlier reductions in the policy rate.

At the same time, the Committee noted that the trade deficit is expected to widen further in FY26 amidst the pickup in economic activity and slowdown in global trade.

Given this macroeconomic outlook and the emerging risks, the MPC considered today’s decision as necessary to ensure price stability.

The Committee noted the following key developments since its last meeting.

“First, the SBP’s FX reserves crossed $14 billion on the back of improved financial inflows and a current account surplus. Second, the recent upgrade in Pakistan’s sovereign credit rating led to a decline in Eurobond yields and narrowed CDS spreads in international markets. Third, inflation expectations increased slightly for consumers but declined for businesses in the latest sentiment surveys. Fourth, FBR tax revenue for FY25 was recorded at Rs11.7 trillion, which fell short of the revised estimate by around Rs200 billion. Lastly, global oil prices remained volatile, whereas metal prices increased. At the same time, the impact of global trade tariffs remained uncertain, prompting central banks to maintain their cautious monetary policy stance,” read the official press release.

In view of these developments and potential risks, the Committee assessed that the real policy rate should continue to be adequately positive to stabilize inflation in the target range of 5 – 7 percent.

“ The MPC emphasized on the need to continue the ongoing prudent monetary and fiscal policy mix to sustain macroeconomic stability. Moreover, the Committee reiterated its view that without structural reforms it would be difficult to achieve higher growth on a sustainable basis”.