The State Bank of Pakistan (SBP) on Monday left its key policy rate unchanged at 11.5%, citing persistent inflationary pressures, elevated global energy prices and growing economic uncertainty linked to the prolonged conflict in the Middle East.

The decision was taken at the fourth meeting of the Monetary Policy Committee (MPC) this year, chaired by SBP Governor Jameel Ahmad, and was broadly in line with market expectations.

In its policy statement, the central bank said the current monetary policy stance remains appropriate to steer inflation toward its medium-term target range of 5% to 7%.

The MPC noted that although global oil prices had eased following recent positive geopolitical developments, they remained higher than pre-conflict levels. The impact of the Middle East conflict, it said, is now increasingly visible in economic indicators.

According to the SBP, headline inflation climbed into double digits in April and May, while core inflation also edged higher.

The central bank attributed part of the inflationary pressure to rising energy costs, which have increased transportation expenses and production costs. Higher wheat and wheat-related product prices over the past two months have also contributed to food inflation.

The committee warned that inflation is likely to remain in double digits over the next few months before gradually easing.

However, it said the outlook remains subject to several risks, including geopolitical developments, fluctuations in global commodity prices, adjustments in electricity and gas tariffs, fiscal slippages and weather-related challenges affecting food supplies.

The MPC observed that economic activity is showing signs of moderation, reflecting the impact of elevated prices, fiscal austerity measures and prevailing economic uncertainty. At the same time, external sector pressures remain manageable.

Despite these challenges, the central bank said Pakistan’s macroeconomic outlook remains broadly unchanged from its previous assessment.

Among key developments since the last policy meeting, the MPC noted that Pakistan’s real GDP growth for fiscal year 2025-26 has been provisionally estimated at 3.7% by the Pakistan Bureau of Statistics. It also highlighted a modest recovery in consumer and business confidence, alongside easing inflation expectations.

The committee further noted that the successful completion of International Monetary Fund (IMF) reviews under the Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF), together with ongoing external inflows, had boosted SBP’s foreign exchange reserves to $17.2 billion as of June 5, 2026.

On the fiscal front, the government estimates a primary budget surplus of 2.5% of GDP for FY26 and is targeting a surplus of 2.0% of GDP in FY27.

The MPC said proactive macroeconomic management, supported by forward-looking monetary policy and continued fiscal consolidation, has helped maintain economic stability despite the prolonged regional conflict and global uncertainties.