Pakistan Maintains Interest Rates Amid Geopolitical Tensions

Pakistan's central bank has maintained the policy rate at 11.50% due to ongoing U.S.-Iran tensions potentially pushing energy costs higher. Governor Jameel Ahmad indicated expectations for inflation to decrease if the conflict does not escalate. The bank last raised rates in April after a substantial earlier reduction.

In a significant decision, Pakistan's central bank has maintained its key policy rate at 11.50% amidst renewed hostilities between the U.S. and Iran, which may lead to rising energy costs and inflation spikes in Pakistan, an import-reliant country.

State Bank of Pakistan (SBP) Governor Jameel Ahmad noted this decision occurred shortly after a ceasefire between Washington and Tehran fell through, leading to tensions involving the strategic Strait of Hormuz. Ahmad expressed optimism for a reduction in inflation by July, contingent on the non-escalation of conflicts.

This policy stance, first adopted in April with a 100 basis point increase, came after stable rates since October 2025 and followed a sharp rate cut previously. This move aligns with the bank's June decision to maintain the rate, emphasizing caution amid geopolitical uncertainties.