As widely anticipated, the State Bank of Pakistan (SBP) has announced that it will keep the key interest rate steady at 11%, citing inflation trends and an economic recovery that align with expectations.

In a statement released after the latest Monetary Policy Committee (MPC) meeting, the central bank projected that inflation may rise moderately in the short term but will remain within the target range throughout the fiscal year 2025–26. The SBP highlighted ongoing, gradual improvement in economic activity, expected to gain further traction due to the lagged impact of earlier rate cuts. However, the committee flagged emerging risks on the external front.

The decision followed the MPC’s observation that inflation in May rose by 3.5% year-on-year, in line with projections, while core inflation registered a slight decline.

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The committee expressed concern over the expanding trade deficit and subdued financial inflows, both of which continue to pose challenges. It also warned that some budgetary measures outlined for FY 2025–26 could drive up imports, increasing pressure on the country’s trade balance.

Given these dynamics, the MPC emphasized that maintaining the current interest rate is essential to preserving macroeconomic and price stability.

The next monetary policy review is scheduled for August 2025, during which the committee will assess the latest economic data and developments.