ISLAMABAD: The Monetary Policy Committee of the central bank adopted a unanimous decision to maintain the SBP policy rate at 11.5 percent in the present cycle without opting for an upward or downward change in the interest rate. The unanimous decision suggests that members of the committee see eye to eye regarding the risks being faced by Pakistan’s economy despite changing circumstances.

SBP Retains Policy Rate at 11.5 Percent

It is pertinent to mention that State Bank of Pakistan has decided to maintain its interest rate at 11.5 percent. This move by SBP shows the continuation of monetary policy while considering various economic factors along with external forces. This decision has been conveyed by the governor of State Bank of Pakistan, Jameel Ahmed, in a press briefing.

It was pointed out that the FX reserves of SBP have now exceeded the target of $18 billion for the end of June 2026. According to the officials, the increase is due to the continued purchase of FX by the central bank and the relatively small current account deficit of the current fiscal year, besides the realization of the planned official inflows.

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As yet another indication of positive macroeconomic sentiment, the credit rating of Pakistan was upgraded from "B-" to "B" by Standard & Poor's. Credit rating upgrades such as these indicate that there is more confidence amongst the international investors as well as the rating agencies about the fiscal prudence of the country, which certainly played a role in the decision of MPC to keep policy rate unchanged.

The Committee also observed that inflation expectations softened among both consumers and firms, as per the most recent surveys carried out before the meeting. Soft inflation expectations typically ease the burden on central banks from increasing interest rates, adding weight to arguments against the need to tighten monetary policy any further.

Another piece of good news in this regard is that the Federal Board of Revenue (FBR) achieved its modified tax collection target in FY26. This not only boosts the budgetary status of the government but also reduces some pressure on the central bank from adopting a conservative interest rate policy.

Every factor mentioned by the committee did not indicate stability. In its most recent World Economic Outlook, the International Monetary Fund (IMF) increased its projection for global inflation in CY26 and CY27, due to the rise in global commodity prices. The external risk shows that, although the current domestic factors favor the decision to keep the policy rate unchanged, the price pressure from abroad is something that the SBP should consider in its next reviews.

Since SBP maintains its policy rate as the most important output from this meeting, then for businesses, borrowers, and investors, borrowing will continue to be affordable for some time. The positive impact that has been created by the buildup in reserves, better credit ratings, and falling inflation expectations in the domestic economy seems to have overridden any worries about rising inflation abroad. The future review by the central bank will depend on how this favorable economic situation continues along with global inflation trends.