Central bank expects inflation to ease in July and remain within 5-7% target range by end of FY27

ISLAMABAD: The State Bank of Pakistan (SBP) on Monday kept its benchmark policy rate unchanged at 11.5%, as the Monetary Policy Committee (MPC) maintained a cautious stance amid external risks despite easing domestic inflationary pressures.

The decision, announced after the MPC’s first meeting of fiscal year 2026-27 and the fifth monetary policy meeting of the calendar year, was in line with market expectations.

Addressing a post-meeting press briefing, SBP Governor Jameel Ahmad said consumer price inflation (CPI) is expected to decline in July.

“We expect the CPI to clock in at the upper band of our target range of 5-7% by the end of this fiscal year,” Ahmad said.

He added that the central bank remains confident inflation will stay within its medium-term target while continuing to monitor domestic and external economic developments.

Cautious approach continues

The latest decision follows the previous MPC meeting on June 15, 2026, when the SBP also left the policy rate unchanged at 11.5%, saying the prevailing monetary policy stance was appropriate to steer inflation towards the medium-term target range of 5-7%.

Economists had broadly expected the central bank to maintain the benchmark rate, citing elevated geopolitical tensions in the Middle East and continued uncertainty in global energy markets, which pose upside risks to inflation despite improving domestic price trends.

Analysts said higher international oil prices and external sector concerns outweighed the case for an immediate monetary easing cycle, prompting the SBP to retain its wait-and-watch approach.

Market reaction

Following the announcement, brokerage house Topline Securities said the decision was in line with its expectations.

“The State Bank of Pakistan (SBP) has kept the policy rate unchanged at 11.5% in today’s Monetary Policy Committee (MPC) meeting, in line with our expectations,” the brokerage said in a commentary.

Focus remains on inflation and external risks

The SBP’s latest decision indicates policymakers remain focused on preserving macroeconomic stability while closely monitoring inflation, the external account and international commodity prices before considering any adjustment to interest rates.

Financial markets are now expected to closely watch upcoming inflation readings, external sector indicators and global oil price movements for signals on the central bank’s monetary policy direction in the months ahead.