The State Bank of Pakistan (SBP) has kept its policy rate unchanged at 11.5 percent with seven of the 10 members of the Monetary Policy Committee (MPC) voting to maintain the status quo.
The decision came on Monday as headline inflation rose to 11.1% in August from 9.2% in July, while core inflation stood at 8.7%.
The SBP also noted that inflation expectations among consumers and businesses increased in September.
The MPC said the intensifying conflict in the Middle East had pushed global commodity prices higher and prolonged supply chain disruptions, increasing uncertainty around the economic outlook.
Despite the risks, the central bank said that domestic macroeconomic conditions remained broadly in line with expectations, while external account pressures were contained by strong workers’ remittances and higher financial inflows.
Pakistan’s foreign exchange reserves rose to $21.4 billion following the issuance of $3 billion in Eurobonds and significant foreign exchange purchases by the SBP.
The central bank said resilient remittances and higher information and communications technology exports were expected to keep the current account deficit within 0-1% of GDP in FY27.
The SBP maintained its forecast for real GDP growth at 3.5-4.5% in FY27, saying recent indicators pointed to a gradual recovery in economic activity.
It said recent inflationary pressures were mainly driven by food prices, particularly wheat, allied products and perishables, while higher energy prices linked to the Middle East conflict also contributed.
The central bank expects inflation to gradually ease towards the upper end of its 5-7% target range by June 2027.
However, it warned that risks had increased due to global commodity price volatility, possible electricity and gas tariff adjustments, supply disruptions and unexpected food price movements.
The MPC said the current monetary policy stance remained appropriate for bringing inflation towards the target over the medium term.
