The State Bank of Pakistan (SBP) has decided to maintain its key interest rate at 11%, surprising analysts who anticipated a rate cut due to cooling inflation and signs of economic recovery. SBP Governor Jameel Ahmed announced the decision following the Monetary Policy Committee (MPC) meeting. He noted that while inflation had decreased to 3.2% in June, it rose slightly in May and June, primarily due to energy costs and base effects. The Governor cautioned that inflation might rise moderately in the coming months due to continued pressures on energy prices.
On the external front, Pakistan’s exports have grown by 4%, and worker remittances increased by $8 billion, contributing to a current account surplus. Foreign exchange reserves have risen by $5 billion, even after making $26 billion in external payments. The agricultural sector is also showing signs of recovery, which should support overall economic growth in the current financial year.
The MPC acknowledged that while inflation expectations have increased slightly for consumers, they have declined for businesses. It also noted that the trade deficit is expected to widen further in FY26 amidst the pickup in economic activity and slowdown in global trade. Given this macroeconomic outlook and emerging risks, the MPC considered the decision necessary to ensure price stability.
The business community expressed disappointment over the central bank’s decision, arguing that it undermines business sentiment and poses challenges for industrialists, entrepreneurs, and investors. Federation of Pakistan Chambers of Commerce & Industry (FPCCI) President Atif Ikram Sheikh stated that the policy rate continues to be 11% despite inflation standing at 3.2%, making no economic sense. He emphasized the need for a significant rate cut to rationalize the key policy rate.
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