The State Bank of Pakistan decided to keep the policy rate unchanged at 11.5 per cent on Monday.

The decision was made during a meeting for the final policy review of FY26.

In a detailed statement, the MPC said that global oil prices had eased in light of recent geopolitical developments; however, it noted that the prices remained elevated compared to pre-conflict levels.

“Nonetheless, as anticipated in the last MPC meeting, the impact of the conflict is now reflecting in recent economic indicators,” it said, noting that “headline inflation rose to double digits in April and May, while core inflation also edged up”.

The statement continued: “Moreover, economic activity is showing some signs of moderation, reflecting the impact of elevated prices, austerity measures and prevalent economic uncertainty”.

It added that the external account pressures remained moderate.

As per the statement, the MPC observed that the macroeconomic outlook remained “broadly unchanged” since its previous meeting.

“In this context, the MPC assessed that the current monetary policy stance remains appropriate to guide inflation towards the target range of 5-7pc over the medium term,” the statement read.

In FY26, the only increase in the policy rate came in the previous review on April 27, when the SBP raised the benchmark rate by 100 basis points to 11.5pc.

The increase was attributed to geopolitical tensions following the conflict in the Gulf, which pushed oil prices higher and disrupted global supply chains.

However, as global oil prices have either remained stable or eased, the grounds for an increase in the policy rate largely disappeared, according to market participants.

Analysts said developments over the past month have reduced concerns of a prolonged conflict in the Middle East, and supply chain conditions have also improved over the past month, according to market sources.

“Before deciding on rates, the MPC will likely assess several factors, including currency stability and the external account,” said Faisal Mamsa, chief executive officer of Tresmark, ahead of the meeting.

Sources in the financial sector had said that there was little likelihood of a further increase in the policy rate, while a reduction also appeared unlikely in the near term.