State Bank of Pakistan keeps policy rate unchanged at 11%

On Monday, June 16, 2025, the State Bank of Pakistan (SBP) decided to keep the key policy rate unchanged at 11%. This decision was made during the latest meeting of the Monetary Policy Committee (MPC). The committee believes the current rate is appropriate to support economic recovery and maintain price stability.

Inflation rose to 3.5% year-on-year in May. This increase was expected. Core inflation, however, went down slightly. At the same time, inflation expectations from both households and businesses showed signs of easing. The MPC expects inflation to rise slowly in the coming months but stay within the target range for the next financial year (FY26).

The committee noted signs of improving economic activity. Growth is happening gradually. Earlier rate cuts are still supporting this recovery. Real GDP for FY25 is estimated at 2.7%. The government aims for stronger growth of 4.2% in FY26.

Despite these positive signs, there are risks. The trade deficit continues to grow. Financial inflows remain weak. Some proposed budget measures for FY26 may increase imports, making the trade gap worse. Still, the MPC believes holding the rate steady will help control these pressures.

The SBP also shared updates on the external sector. Although the trade deficit widened in April, the current account stayed almost balanced. This was seen as a good sign. Additionally, the recent completion of the first review under the IMF’s Extended Fund Facility (EFF) brought in $1 billion. This raised Pakistan’s foreign exchange reserves to $11.7 billion by June 6.