State Bank announces latest monetary policy

ISLAMABAD: The State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC) has decided to keep the policy rate unchanged at 10.5 percent, citing global economic uncertainties driven by the ongoing conflict in the Middle East and rising costs of fuel, logistics, and insurance, ARY News reported.

The central bank highlighted that inflation in Pakistan surged from 5.8 percent in January to 7 percent in February, reflecting growing pressure on households and businesses.

As of February 27, the SBP’s foreign exchange reserves increased to $16.3 billion, signaling improved liquidity. Large-scale manufacturing (LSM) recorded modest growth of 0.4 percent in December 2025, while overall GDP growth for the first half of the current fiscal year (July–December 2025–26) stood at 4.8 percent.

In January 2026, the current account showed a surplus of $121 million, and the GDP growth for the fiscal year is projected to range between 3.75 and 4.75 percent.

The central bank also noted that private sector credit increased by Rs790 billion as of February 20, indicating stronger lending activity in the economy. The SBP aims to raise foreign exchange reserves to $18 billion by the end of the fiscal year.

However, the bank warned that inflation is likely to remain above 7 percent for the remaining months of FY 2026, reflecting continued pressures from rising global energy and transport costs.

Analysts say that while monetary policy remains tight, the central bank is balancing growth and inflation amid external shocks and domestic fiscal pressures.

Editorial note: This decision signals the SBP’s cautious approach to maintain economic stability without stifling growth in a fragile global and domestic environment.