SBP maintains key interest rate at 11%

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After the meeting of the Monetary Policy Committee (MPC), the State Bank of Pakistan (SBP) has not changed the key rate of interest by 11 %.

The decision was announced by SBP Governor Jamil Ahmed after the MPC meeting on Wednesday.

Addressing a press conference in Karachi, the head of the SBP said that although inflation was the lowest in April, it increased slightly during May and June, which was driven by large -scale energy costs and basic effects.

The governor noted that inflation may increase in the coming months due to constant pressure on energy prices.

On the external front, he said that Pakistan’s exports have increased by 4 %, adding that exports need to be increased to maintain the stability of the existing account.

The governor also confirmed a significant increase in workers’ remittances, which increased by $ 8 billion and helped keep the current account in the surplus.

Highlighting economic stability, he said that the country fulfilled all its debt responsibilities on time and foreign exchange reserves increased by $ 5 billion even after earning $ 26 billion in external payments.

He said the agricultural sector is also showing signs of rehabilitation, which supports the overall economic growth in the current financial year.

‘Structural fixes’

According to a central bank statement, the MPC noted that inflation has been somewhat damaged in the context of energy prices, especially in the context of more than the expected adjustment in gas prices.

“However, inflation is likely to stabilize the target limit,” he said, adding that the economic activity is still gaining further traction between the unstable effects of the previous decline in the policy rate.

At the same time, the statement said that the committee noted that the trade deficit is expected to expand in the financial year between election and slowdown in global trade.

He added, “Given this economic theory and emerging dangers, the MPC considered today’s decision to ensure the stability of the price.”

The committee also noted the key developments since its last meeting, which states that $ 14 billion has been crossed on the back of SBP’s foreign exchange reserves and the current account increase.

Secondly, the recent upgrade in Pakistan’s sovereign credit rating resulted in the decline in yorubond production and the CDS was harassed in international markets.

In addition, inflation expectations for consumers increased slightly, but the latest sentiment survey declined business.

Finally, the statement said, global oil prices are unstable, while metal prices have increased. It added, “At the same time, the effects of global trade prices remained uncertain, forcing central banks to maintain their careful monetary policy stance.”

“In view of these developments and potential risks, the committee estimated that the actual policy rate should be properly positive to stabilize inflation in the target range from 5 to 7 %.

Further, the committee reiterated its view that it would be difficult to achieve high growth on a sustainable basis without structural reforms.

The decision came when the government moved the reforms under a contraction budget to prevent the $ 7 billion IMF program and deficit.

In the update of its economic outlook on Tuesday, the IMF reduced its growth forecast for the fiscal year ending June 2026 to 3.6 %, which is less than the government’s 4.2 % target.

The SBP held rates in May in June, after which cut 100 points in May, after the March break, it began easily.

Since June 2024, it has reduced its policy rate from 1,100 twenty points to a record 22 % as prices have dropped.

In a Reuters survey this week, all 15 analysts said they expect SBP to be ease, nine predicted 50 points cuts, four have been predicted to reduce deep 100 points and two small 25 points are offered.

Headline inflation in June has declined by 3.2 % and is estimated to have a 3.5 % -4.5 % in July, which is within the target range of 5.5 % – 7.5 % of SBP for the fiscal year ending June 2026.

The government says the economy has stabilized, but analysts have warned that growth is critical and changing commodity prices globally can still pressure prices and external balance.

– with additional input from Reuters