The State Bank of Pakistan left its benchmark policy rate unchanged at 11.5 percent on June 15, 2026, as inflation climbed back above the central bank’s target range and global oil price risks continued to cloud the outlook.
Why the Rate Was Held Steady
The decision follows a surprise 100 basis point hike in April 2026, when the SBP raised rates from 10.5 percent to 11.5 percent, the first increase since June 2023. Policymakers said the earlier hike was needed to anchor inflation expectations after volatile oil prices tied to Middle East tensions clouded the outlook.
Inflation Has Climbed Sharply
Headline inflation accelerated to 11.7 percent in May 2026, exceeding the central bank’s 5 to 7 percent target range and reaching its highest level since June 2024. The central bank expects inflation to remain in double digits over the coming months, driven by higher domestic fuel prices, potential fiscal slippages, and weather-related food price uncertainty.
Some Bright Spots in the Economy
Economic growth rose to 3.7 percent in FY26, supported mainly by the services and industrial sectors. The central bank also noted that recent geopolitical developments have been broadly positive, though oil price risks remain a key watch point for the months ahead.
What This Means Going Forward
With inflation running well above target, analysts widely expect the SBP to maintain a cautious, data-dependent stance rather than resume rate cuts in the near term. The policy rate had previously been slashed by 1,000 basis points from 22 percent since June 2024, before this year’s surprise hike interrupted that easing cycle.
Frequently Asked Questions
What is Pakistan’s current policy interest rate?
The State Bank of Pakistan’s benchmark policy rate stands at 11.5 percent as of June 2026.
Why did inflation rise above target in Pakistan?
Higher fuel prices, fiscal pressures, and weather-related food price risks pushed headline inflation to 11.7 percent in May 2026.
When did the SBP last change its policy rate?
The SBP raised rates by 100 basis points in April 2026, the first hike since June 2023, and has held steady since.
