The State Bank of Pakistan’s Monetary Policy Committee (MPC) decided on Monday to keep the key interest rate unchanged at 11.5%. The committee, with seven out of ten members voting for stability, cited rising global oil prices and inflation due to Middle East tensions but also noted robust economic indicators like workers' remittances and higher foreign reserves exceeding $21 billion. Headline inflation in August rose to 11.1% from 9.2% the previous month. The MPC emphasized the need for a cautious approach amid uncertain global conditions, committing to monitor data closely while maintaining price stability.
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The State Bank of Pakistan’s Monetary Policy Committee (MPC) decided on Monday to keep the key policy rate unchanged at 11.5%. This decision was made by a majority vote of seven out of ten members despite prolonged tensions in the Middle East driving up global oil prices and causing inflationary pressures.
According to the MPC, recent domestic macroeconomic data showed headline inflation increasing to 11.1% year on year in August from 9.2% in July, while core inflation was slightly lower than expected. The committee noted that external account pressures remained under control, supported by robust workers' remittances and higher financial inflows.
The MPC emphasized that economic activity had picked up as indicated by recent high-frequency indicators, supporting their decision to maintain the current monetary policy rate aimed at guiding inflation towards a target range of 5-7% over the medium term.
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The State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC) on Monday kept the key policy rate unchanged at 11.5 per cent.
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Committee → keep → cent
The decision comes as prolonged tensions in the Middle East drive up global oil prices and fuel inflation.
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tensions → come → prices
In a detailed statement, the MPC said it decided to keep the policy rate unchanged with a majority decision of seven out of ten members.
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it → say → members
MPC noted the recent escalation in the Middle East conflict, which it said led to an increase in global commodity prices and persistent supply chain disruptions.
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it → note → prices
“However, recent domestic macroeconomic data turned out broadly in line with the MPC’s expectations,” the statement said, adding that headline inflation increased by 11.1pc year on year in August from the previous 9.2pc in July and “core inflation was slightly lower than expectations”.
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inflation → turn → expectations
“External account pressures remained contained, supported by robust workers’ remittances and higher financial inflows.”
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pressures → remain → remittances
MPC noted that economic activity picked up “as reflected by recent high-frequency indicators”.
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activity → note → indicators
MPC said that the current monetary policy rate was “appropriate to guide inflation towards target range of 5-7pc over the medium term”.
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rate → say → term
“However, uncertainty regarding the outlook has increased, particularly from the worsening geopolitical environment.”
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uncertainty → regard → environment
Listing key developments since its last meeting, MPC noted that Pakistan’s sovereign credit rating was upgraded to B3 by Moody’s with a stable outlook.
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rating → list → outlook
It also noted that the country had tapped international capital markets to “raise $3bn through Eurobonds,” leading to an increase in foreign reserves to over $21bn
“
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country → note → 21bn
Third, inflation expectations of both businesses and consumers increased in September, while their confidence weakened,” the statement read.
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statement → increase → September
It also observed an output decline of 3.5pc in June in large-scale manufacturing, which it said brought the “cumulative FY26 growth to 5pc”.
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it → observe → 5pc
“Fifth, fiscal consolidation turned out higher than the budgetary target during FY26,” it said, further noting that Federal Board of Revenue (FBR) collection had remained “on-target” during July to August in FY27.
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collection → turn → FY27
It continued: “While SBP transferred higher profit of Rs1.9 trillion than the budgeted amount of Rs1.4tr to the government.
“Lastly, central banks have become more cautious amidst challenging global economic conditions.”
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banks → continue → conditions
Within the context of the ongoing developments, the MPC said that it was committed to “achieving price stability with close monitoring of incoming data and the ongoing situation in the Middle East”.
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it → say → East
It also observed that adverse geopolitical events as well as weather disruptions had increased in frequency, posing risks to the macroeconomic outlook.
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events → observe → outlook
In this regard, the MPC stressed the need for maintaining a “prudent monetary and fiscal policy mix and further buildup of buffers to absorb supply shocks”.
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MPC → stress → shocks
Bankers had anticipated a status quo, but some analysts had predicted that the central bank was in a difficult position and would lift the policy rate by 50 points.
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bank → anticipate → points
Renewed US-Iran hostilities and the risk of disruption to shipping through the Strait of Hormuz have kept oil prices elevated, adding to import costs in energy-dependent Pakistan.
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hostilities → renew → Pakistan
The Sensitive Price Index (SPI), or the weekly inflation, rose 8.62pc year-on-year for the week ending on September 10, with a major contribution from costly onion and petroleum products.
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Index → rise → products
The SBP has held the rate steady since raising it by 100 basis points in April in response to rising global energy prices and supply chain risks — its first increase in nearly three years.
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SBP → hold → years
Before that, the central bank had maintained the rate at 10.5pc in January and March after a surprise 50bps cut in December 2025.
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bank → maintain → December
The SBP has cut the key rate by a cumulative 1,050 basis points since mid-2024, from a record 22pc reached in June 2023, as inflation cooled sharply from multi-decade highs.
Additional input from Reuters
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inflation → cut → Reuters
