SBP Holds Firm: Navigating Inflation and Hostilities

The State Bank of Pakistan maintains its policy rate at 11.50% amid U.S.-Iran tensions impacting energy prices. Gov. Jameel Ahmad outlines prospects for reduced inflation and GDP growth, citing external factors like commodity prices and El Niño. The bank foresees controlled debt servicing amid stable foreign reserves.

In a decisive move, Pakistan's central bank opted to maintain its benchmark interest rate at 11.50% on Monday as tensions between the U.S. and Iran continue to fuel global economic uncertainty, particularly impacting energy prices. The decision falls in line with the bank's cautious approach amidst the unpredictable geopolitical landscape.

State Bank of Pakistan (SBP) Governor Jameel Ahmad expressed optimism about inflation trends, forecasting a potential decline if hostilities do not worsen. He reiterated expectations for GDP growth between 3.5% and 4.5% through to June 2026, crediting fiscal discipline and external factors as key influencers on the economic outlook.

The SBP's Monetary Policy Committee also highlighted the importance of fiscal reforms and pointed to ongoing efforts at economic stability amidst fluctuating commodity prices and the challenges posed by potential El Niño weather disruptions. The bank remains focused on maintaining a sustainable growth trajectory while managing debt obligations effectively.