KARACHI: Pakistan’s central bank held the key policy rate at 11.50 percent on Monday, the bank’s governor announced, as renewed US-Iran tensions this month threatened to push energy costs and inflation higher in the import-dependent country.
The decision followed the collapse of a ceasefire agreement between Washington and Tehran, with the two sides exchanging strikes over control of the Strait of Hormuz, a critical corridor for global oil shipments, for two weeks. Both parties halted their attacks late last week.
State Bank of Pakistan (SBP) Governor Jameel Ahmad said there will be some reduction in inflation in July, adding that he hoped inflation will start falling in the next two months if the conflict does not escalate.
“The Committee assessed that the macroeconomic outlook has improved from its previous meeting, though it remains susceptible to heightened risks, particularly following the resurgence of conflict in the Middle East,” the SBP said, citing its governor.
“The Committee observed that the earlier de-escalation had led to a decline in global oil prices and a relative ease in supply chain disruptions, which resulted in some improvement in recent economic indicators. Headline and core inflation moderated in June, though both remained at elevated levels.”
At the same time, the SBP said, incoming high frequency indicators pointed to some pickup in economic activity, whereas external account pressures remained moderate.
“Taking into account these developments and evolving risks, the MPC assessed that the current monetary policy stance remains appropriate to guide inflation toward the target range of 5-7 percent over the medium term,” the central bank said.
The SBP has raised the policy rate once this year by 100 basis points to 11.5 percent in April after holding rates steady since October 2025.
Meanwhile, mediators have achieved some progress in efforts to get the US and Iran back to negotiations and avert an all-out war in the Middle East, two regional officials told AP on Monday.
The comments came after neither the US nor Iran reported carrying out any attacks for three straight days — a respite after about two weeks of sustained bombardments that had led to increasing fears of a return to all-out war.
Oil prices have eased to around Rs25,232 ($91) per barrel over the past two to three days after reaching a recent high of around Rs27,729 ($100) per barrel for Brent crude. The surge was driven by supply disruptions caused by rising Middle East tensions.
PAKISTAN STOCKS SURGE ON EASING GLOBAL OIL PRICES
On Monday, Pakistani stocks surged by more than 7,200 points, with analysts attributing the rebound to easing global oil prices.
The benchmark KSE-100 Index rose 7,241.13 points, or 4.23 percent, to close at 178,262.33, up from the previous close of 171,021.20 points.
“Stocks staged sharp recovery amid halt to US-Iran attacks,” Ahsan Mehanti, Chief Executive Officer at Arif Habib Commodities, told Arab News.
“Surging global equities, speculations over SBP (State Bank of Pakistan) policy amid decline in global oil prices played catalyst role in bullish activity at PSX.”
