The State Bank of Pakistan (SBP) on Monday left its key policy rate unchanged at 11.5%, citing rising inflation, economic uncertainty and the need to keep monetary conditions sufficiently tight to steer inflation towards its medium-term target range.
Announcing its latest monetary policy decision, the SBP's Monetary Policy Committee (MPC) said headline inflation had accelerated into double digits in April and May, while core inflation had also increased. At the same time, economic activity has started showing signs of moderation due to elevated prices, fiscal austerity measures and prevailing uncertainty.
The committee said that although global oil prices had eased following recent positive geopolitical developments, they remained above pre-conflict levels. After assessing recent developments and emerging risks, the MPC concluded that the current monetary policy stance remains appropriate to guide inflation towards the target range of 5-7% over the medium term.
The central bank noted that Pakistan's economy grew by an estimated 3.7% in fiscal year 2025-26, compared with 3.2% in the previous year. Growth was largely driven by the services and industrial sectors, while agriculture also made a meaningful contribution. However, the MPC observed that the Middle East conflict and domestic austerity measures had dampened economic momentum, and growth could face further headwinds in FY27 due to spillover effects from the conflict and weaker agricultural prospects amid challenging weather conditions.
Inflation jumps as SBP holds policy rate
Headline inflation rose from 7.3% in March to 11.7% in May 2026.
Source: State Bank of Pakistan monetary policy statement, June 15, 2026
Key numbers
On the external front, the committee said pressures remained manageable despite a current account deficit of $0.3 billion in April. The cumulative deficit for July-April FY26 stood at $0.2 billion, primarily due to a wider trade deficit caused by higher energy imports. However, strong workers' remittances and increased official inflows helped contain external vulnerabilities and supported a continued buildup in foreign exchange reserves. SBP reserves rose to $17.2 billion by June 5 and are projected to reach $18 billion by the end of June.
The MPC also highlighted the successful completion of reviews under the International Monetary Fund's Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF), which contributed to strengthening external buffers. It noted that the government expects to achieve a primary budget surplus of 2.5% of GDP in FY26 and is targeting a surplus of 2.0% in FY27 through continued fiscal consolidation.
Inflation remained the committee's primary concern. Headline inflation surged from 7.3% in March to 10.9% in April and further to 11.7% in May. The SBP attributed the increase to higher domestic energy prices linked to the Middle East conflict, rising transportation and production costs, and a sharp increase in wheat and wheat-product prices. Core inflation also climbed to 8.7% in May. The committee warned that inflation could remain in double digits for the next few months before gradually easing.
The Monetary Policy Committee decided to keep the policy rate unchanged at 11.5 percent in its meeting held on June 15, 2026.
— SBP (@StateBank_Pak) June 15, 2026
For details: https://t.co/QmtBOmlMuF pic.twitter.com/QJaQwcOxo8
The MPC cautioned that the inflation outlook remains subject to several risks, including geopolitical developments, possible increases in fuel, electricity and gas prices, fiscal slippages and weather-related pressures on food prices. It reaffirmed the central bank's commitment to price stability and said it would continue to closely monitor economic developments while supporting macroeconomic stability through a forward-looking monetary policy framework.
The committee also stressed the need to accelerate structural reforms aimed at improving productivity, broadening the tax base, reforming state-owned enterprises and strengthening the economy's resilience to external shocks.