Karachi, July 27, 2026 — The State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC) on Monday decided to keep the policy rate unchanged at 11.5 percent, marking the second consecutive hold and the first policy decision of fiscal year 2026-27. The announcement was made by SBP Governor Jameel Ahmed during a press conference in Karachi.
The move was widely anticipated by market participants. A poll conducted by Topline Securities had found that 97% of respondents expected the policy rate to remain unchanged at the meeting, while the remaining 3% anticipated a 100-basis-point cut. Similarly, some other brokerage house surveys cited more than 90 percent of stakeholders expected the SBP to leave the policy rate unchanged, with only a small number foreseeing a modest increase.
This is the fifth MPC meeting of the calendar year and the committee’s first session under the new fiscal year’s monetary policy calendar, which the central bank recently expanded, doubling the frequency of its press briefings.
The current rate reflects a cautious pause following a volatile stretch. The SBP cut its policy rate by 50 basis points to 10.5% in December 2025, before raising it by 100 basis points to 11.5% in April 2026 — a move that had gone against market expectations at the time. That increase was the central bank’s first hike in nearly three years, following a cumulative 1150-basis-point reduction from a record high of 22% in June 2024 as inflation had come under control. The rate was then held steady in June, and again now in July.
According to the central bank’s statement, the MPC judged that the macroeconomic outlook had improved since its last meeting, though risks remain elevated — largely due to the resurgence of conflict in the Middle East. Governor Jameel Ahmed noted that inflation had eased gradually over the first half of the year, averaging 5.5% between July and February, near the lower end of the SBP’s target range. However, he added that the Middle East conflict had begun pushing up petroleum and global commodity prices from early March onward.
A separate assessment lends context to the inflation picture: the Pakistan Institute of Development Economics (PIDE) reported that headline consumer inflation slowed to 11.1% in June, while urban and rural core inflation remained elevated at 8.7% and 7.9%, respectively. The institute attributed much of the recent inflationary pressure to food, energy, transport, and administered prices — areas monetary policy cannot directly influence — and cautioned that a rebound in the weekly Sensitive Price Indicator warranted caution before declaring disinflation firmly established.
Renewed hostilities between the United States and Iran over the past two weeks were also cited as a key factor tempering optimism. Market participants had, following the signing of a US-Iran memorandum of understanding on June 18, begun pricing in cumulative rate cuts of 100 to 150 basis points over the next two to three MPC meetings — expectations that faded as tensions resurfaced.
External Account and Growth Outlook
Despite the cautious tone on inflation, the central bank pointed to several areas of improvement on the external front. The MPC noted that proactive macroeconomic management, underpinned by tight monetary policy and sustained fiscal consolidation, had helped the economy absorb the ongoing global supply shock while preserving macroeconomic stability.
The governor also shared updated projections:
- Foreign exchange reserves stood at $20.2 billion at the end of December 2026 and are expected to hold around that level through December, with further improvement anticipated over time.
- Workers’ remittances are projected to rise to around $44 billion for the current fiscal year, up from $41.6 billion the previous year.
- The current account posted a $139 million deficit in FY26, though the SBP expects the current account deficit to widen somewhat as economic activity picks up.
- For businesses and consumers, Monday’s decision means borrowing costs will stay unchanged for now. The business community has continued to press for a more substantial rate cut to support economic activity, but the SBP’s decision suggests it remains unwilling to loosen policy until inflation risks — particularly those tied to global oil markets and geopolitical instability — show clearer signs of easing.
The SBP’s next MPC meeting will be watched closely for whether easing Middle East tensions, or their further escalation, tips the committee toward its first rate cut since April’s surprise hike
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