Economy · Monetary policy
The State Bank of Pakistan has kept its benchmark policy rate at 11.5%, a second consecutive hold. Headline inflation has eased and the macroeconomic outlook has improved — but the central bank is not yet willing to start cutting.
The short version: rate unchanged at 11.5%. Inflation eased to 11.1% in June from 11.7% in May. Growth slowed to 4.0% in the first quarter, weighed by regional conflict and energy prices. The Bank expects inflation to move toward the 5–7% target range by mid-2027.
What the Bank decided, and why
Holding rather than cutting is a judgement that the direction of inflation is right
but the level is still too high to relax. Headline inflation eased to 11.1% in June from
11.7% in May, helped by lower global energy prices and favourable electricity tariff
adjustments.
Against that, growth slowed to 4.0% in the first quarter, weighed down by regional
conflict and the resulting rise in global energy prices. That is the tension in the
decision: a weakening growth picture argues for cuts, while double-digit inflation
argues for patience.
| Indicator | Reading |
|---|---|
| Policy rate | 11.5% (unchanged) |
| Headline inflation, June | 11.1% |
| Headline inflation, May | 11.7% |
| Q1 growth | 4.0% |
| Inflation target range | 5–7% by June 2027 |
| FY2027 growth projection | 3.5–4.5% |
How this reaches your finances
If you are borrowing
The policy rate sets the floor under everything else. Business lending, car finance,
housing finance and credit facilities are priced off it, usually as a spread over
KIBOR, which tracks the policy rate closely. A hold means borrowing costs stay roughly
where they are rather than easing.
If you hold a variable-rate loan, no news is neutral news — your instalment is
unlikely to move much on this decision. If you were waiting for cheaper credit before
committing to a purchase, the wait continues.
If you are saving
Deposit rates follow the policy rate down eventually, so a hold preserves returns on
savings accounts and term deposits for now. That matters more than usual when inflation
is above 11%: a deposit paying less than the inflation rate is losing purchasing power
even while the balance grows.
With inflation at 11.1%, the question is not what your savings pay. It is
whether what they pay is beating the rate at which money is losing value.
Government securities are one route savers use to chase real returns, and access has
widened — the
InvestPak portal now allows investment from Rs 5,000 without a bank visit.
Separately, deposit
rules including cash limits and withholding tax slabs changed this year, which
affects net returns.
Why inflation is proving stubborn
Pakistani inflation is driven less by domestic demand than by imported costs and
administered prices. Energy is the clearest channel: fuel and electricity feed into
transport, which feeds into food, which dominates household spending. That is why a
regional conflict affecting oil prices shows up in a Karachi grocery bill within weeks.
It also explains the Bank’s caution. Cutting into an inflation rate driven by external
costs risks stimulating demand without addressing the cause, and can pressure the rupee
— which raises import costs and feeds inflation again.
The external position
One genuine bright spot is remittances, which reached
$41.6 billion over the
last financial year. Those inflows support the current account and the rupee, and a
stable currency is one of the conditions the Bank will want in place before it starts
cutting.
What to watch next
- The monthly inflation print. Sustained movement below 11% is the
precondition for cuts. - Global energy prices. The single biggest swing factor in Pakistan’s
inflation, and largely outside domestic control. - The rupee. Depreciation would delay easing; stability brings it
closer. - Electricity tariff decisions. Administered price changes feed
directly into the headline number.
On the Bank’s own projection — inflation approaching 5–7% by June 2027
— the path implies gradual easing rather than a sharp pivot. Households and
businesses planning around borrowing costs should assume expensive credit for some time
yet, and treat any cut as a bonus rather than a plan.
Frequently asked questions
What is Pakistan’s current policy rate?
The State Bank has held its benchmark policy rate at 11.5%, a second consecutive decision to leave it unchanged.
Why did the SBP not cut rates?
Inflation is easing but remains above 11%, and cutting too early risks reigniting price pressure and putting the rupee under strain. The Bank has chosen to wait for sustained improvement.
What is the current inflation rate?
Headline inflation eased to 11.1% in June, down from 11.7% in May.
How does the policy rate affect my loan?
Most lending is priced as a spread over KIBOR, which tracks the policy rate. A hold means variable-rate instalments are unlikely to change much on this decision.
Is this good or bad for savers?
A hold preserves deposit returns for now. But with inflation above 11%, deposits paying less than that are still losing real purchasing power.
When might rates start falling?
The Bank expects inflation to move toward its 5–7% target range by June 2027, which implies gradual easing rather than an abrupt cut. Sustained inflation readings below 11% would be the signal.
What is the growth outlook?
Growth slowed to 4.0% in the first quarter. The Bank projects FY2027 growth of 3.5% to 4.5%.
