State Bank of Pakistan holds policy rate at 11.5%

The State Bank of Pakistan (SBP) has maintained its policy rate at 11.5%, following a decision by the Monetary Policy Committee (MPC) where seven of the ten members voted to keep the rate unchanged. This marks the third consecutive meeting at this level.

The decision comes amid a sharp rise in headline inflation, which climbed to 11.1% in August from 9.2% in July. Core inflation was reported at 8.7%. The MPC attributed the inflationary surge to intensifying conflicts in the Middle East, which have driven up global commodity prices and caused ongoing supply chain disruptions. This spike has left the real interest rate cushion at approximately 40 basis points.

Despite inflationary pressures, the SBP noted that domestic macroeconomic data remains broadly in line with expectations. Foreign exchange reserves have risen to $21.4 billion, supported by Eurobond issuances and robust worker remittances. Additionally, Moody’s has upgraded Pakistan’s sovereign credit rating to B3 with a stable outlook. The central bank projects real GDP growth for FY27 to be between 3.5% and 4.5%, supported by a recovering agricultural sector.