The State Bank of Pakistan (SBP) kept the policy rate at 11% level unchanged at its June 16, 2025, meeting.
The Committee observed that the May inflation rise to 3.5 percent y/y was consistent with its forecast, while core inflation fell modestly.
In addition, household and business inflation expectations softened. In the future, inflation is projected to move upward and settle in the target corridor in FY26.
The Monetary Policy Committee (MPC) also estimated that economic growth is gaining pace slowly and will pick up further next year with the still-unfolding effect of previous policy rate reductions.
Simultaneously, the Committee observed some potential threats to the external sector while there was continued widening in the trade deficit and weak financial inflows.
Additionally, a few of the suggested FY26 budget proposals can also expand the trade deficit further through the expansion of imports. Herein, the Committee found today’s decision apt to maintain the macroeconomic and price stability.
Committee observed the following important developments since its previous meeting. First, the real growth of GDP for FY25 stands provisionally at 2.7 percent, and 4.2 percent growth is targeted by the government for next year. Second, even with a wide increase in the trade deficit, the current account was also broadly balanced in April.
In the meantime, the completion of the first EFF review resulted in the release of about $1 billion, lifting the SBP’s FX reserves to $11.7 billion on June 6.
