KARACHI: The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) on Monday decided to maintain the policy rate at 10.5 per cent, pausing its easing cycle as escalating tensions in the Middle East emerge as a fresh risk to the inflation outlook.
In a statement issued following its meeting on Monday, the committee observed that while incoming domestic data remained largely consistent with January’s projections, the macroeconomic environment has become “quite uncertain” due to the geopolitical situation in the Gulf region.
The MPC noted that the conflict has led to a sharp increase in global fuel prices, as well as rising freight and insurance costs, which are already affecting cross-border trade and travel. The committee emphasised that the intensity and duration of the conflict would be the primary determinants of its impact on the domestic economy.
Despite these external shocks, the MPC highlighted that Pakistan’s macroeconomic fundamentals are currently more resilient than they were at the start of the Russia-Ukraine war in early 2022. Specifically, the committee pointed to improved inflation levels and stronger foreign exchange and fiscal buffers.
The central bank’s initial assessment indicates that key macroeconomic variables for FY26 remain within earlier projected ranges. However, the committee warned that risks to this outlook have increased significantly. The MPC underscored the importance of maintaining prudent monetary and fiscal policies to safeguard the economy’s stability against these evolving global risks.
