Pakistan Central Bank Holds Policy Rate Steady at 11.5 Percent

The State Bank of Pakistan (SBP) decided on Monday to keep its key policy rate unchanged at 11.5 percent, concluding the final policy review for fiscal year 2026. This decision follows a previous adjustment in April, when the benchmark rate was raised by 100 basis points to its current level.

The April rate hike was primarily driven by escalating geopolitical tensions, particularly in the Gulf region, which led to a surge in global oil prices and disrupted supply chains. However, market participants note that a stabilization or easing of global oil prices has diminished the immediate need for further rate increases.

Market sources indicate that concerns over prolonged Middle East conflict have lessened over the past month, coinciding with improvements in global supply chain conditions. This shift in global economic factors has contributed to the central bank's decision to hold rates steady.

Looking ahead, analysts anticipate that the Monetary Policy Committee (MPC) will closely assess several key economic indicators before making future decisions. These include currency stability and the performance of Pakistan's external account. While a reduction in the policy rate is not anticipated in the immediate future, market participants will be closely watching these developments.

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Before deciding on rates, the MPC will likely assess several factors, including currency stability and the external account.