The State Bank of Pakistan (SBP) has kept its policy rate unchanged at 11.5 percent, as the central bank weighs rising inflation and growing risks from higher global energy prices.
The decision was taken by the Monetary Policy Committee (MPC) at its second meeting of fiscal year 2026-27 and sixth meeting of the calendar year. It was broadly in line with market expectations.
The MPC had also maintained the rate at 11.5 percent at its July 27 meeting. At the time, the central bank said the monetary policy stance remained appropriate for bringing inflation towards its medium-term target of 5 percent to 7 percent, despite improving economic conditions and rising external risks linked to the conflict in the Middle East.
The latest decision comes as Pakistan faces renewed inflationary pressure. Inflation rose to 11.1 percent in August from 9.2 percent in July, while global oil prices have climbed sharply as conflict in the region disrupts shipping and raises concerns about energy supplies.
Higher fuel prices could put further pressure on Pakistan’s inflation outlook and reduce the room for the SBP to cut interest rates.
Most market participants had expected the central bank to hold the rate. A Topline Securities survey showed 84 percent of respondents expected no change, while 14 percent predicted a 50-basis-point increase and 2 percent expected a 100-basis-point hike.
Ismail Iqbal Securities also expected the SBP to maintain the status quo, citing improving external buffers but renewed risks from energy prices and regional uncertainty.
The central bank also has some support from improving external conditions. Foreign exchange reserves have strengthened and the current account remains contained. Pakistan’s recent $3 billion Eurobond launch has also improved confidence in its external financing position.
However, analysts warn that the pressure on interest rates could build if oil and food prices remain high.
“Pakistan’s interest rate outlook may no longer be about Pakistan’s inflation. It may be about everybody else’s inflation problem,” said Faisal Mamsa, CEO of Tresmark.
He pointed to Brent crude prices above $105 a barrel, higher global bond yields and persistent inflation in major economies as factors that could influence the SBP’s future decisions.
Bloomberg Economics and BMI have also shifted towards a hold at the September meeting, although both see increasing pressure for higher rates ahead.
Analysts expect the next major test to come in the final months of 2026. If inflation remains elevated and geopolitical tensions continue, the SBP could face pressure to raise the policy rate by 50 to 100 basis points at a future meeting.
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