Pakistan’s central bank has kept the interest rate unchanged at 11%, citing fresh inflationary risks due to volatile global oil prices and regional geopolitical tensions, BW Businessworld reported.

The State Bank of Pakistan (SBP) maintained its policy stance after trimming the rate by 1,100 basis points since June 2024, including a 100-basis-point cut last month. According to BW Businessworld, the decision was broadly in line with market expectations and supported by a majority of analysts polled by Reuters.

The SBP’s Monetary Policy Committee said it expects inflation to fluctuate in the near term but ultimately fall within its medium-term target range of 5–7%. However, it flagged potential risks from supply chain disruptions, energy market volatility, and impending adjustments to domestic utility tariffs.

In May, headline inflation climbed to 3.5%, exceeding the finance ministry’s projection of up to 2%. For the fiscal year ending June, the central bank projects average inflation between 5.5% and 7.5%.

BW Businessworld noted that the pause in monetary easing follows the government’s recently announced contractionary federal budget for FY 2025–26. The budget reduced public spending by 7% and set an economic growth target of 4.2%, as the country seeks to meet conditions under its ongoing USD 7 billion loan programme with the International Monetary Fund.

Mustafa Pasha, Chief Investment Officer at Lakson Investments, said that with oil prices up nearly 15% in recent weeks, holding the rate steady is a sensible step, according to BW Businessworld. He said this gives policymakers time to assess the impact of fiscal changes and forthcoming energy tariff increases on inflation dynamics.

While the government insists that Pakistan’s $350bn economy is stabilising, analysts remain cautious about structural fiscal challenges and external sector vulnerabilities, particularly in light of lingering global uncertainties and conflict-related commodity shocks.