SBP keeps policy rate unchanged at 11.5% amid inflation pressures

KARACHI: The State Bank of Pakistan has decided to keep its key policy rate unchanged at 11.5%, the central bank announced on Monday following a meeting of its Monetary Policy Committee chaired by Governor Jameel Ahmad.

The central bank said inflation had re-entered double digits in April and May, adding that it expects price pressures to remain in the double-digit range in the coming months before gradually easing.

It noted that geopolitical tensions in the Middle East have pushed up energy, transport and production costs, increasing inflationary pressure on the economy.

The SBP said its provisional estimate for real GDP growth in fiscal year 2025-26 stands at 3.7%, reflecting an improvement over the previous year.

It added that large-scale manufacturing grew by 6.5% from July to March, with industry and services contributing significantly to overall growth.

The current account recorded a $300 million deficit in April, but the central bank expects the full-year deficit to remain at the lower end of earlier projections due to strong remittances.

Foreign exchange reserves stood at $17.2 billion as of June 5 and are projected to reach $18 billion by the end of the month.

The SBP said the government has set a primary budget surplus target of 2.5% of GDP for FY2025-26 and 2% for the following year, while stressing the need for fiscal discipline, tax base expansion and reforms in state-owned enterprises for sustainable growth.

The Monetary Policy Committee said it will continue to closely monitor inflation trends, global developments, and changes in fuel, electricity and food prices.

Meanwhile, the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) rejected the decision, saying high interest rates are harming industry, exports and investment, and urged the SBP to bring rates down to single digits in the next policy meeting.