The State Bank of Pakistan (SBP) released its latest Monetary Policy Report (MPR), outlining recent economic developments, policy decisions, and the macroeconomic outlook. With the policy rate held at 11% in June and July, the SBP expects inflation to remain within its medium-term target. The report projects moderate economic growth, manageable external pressures, and a steady buildup in foreign exchange reserves through FY26, while highlighting potential domestic and global risks.
Key Highlights
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Policy Rate: Held steady at 11% in June and July MPC meetings to keep the real policy rate adequately positive for inflation stability.
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Inflation Outlook: SBP’s fan chart suggests inflation will stay within the medium-term target range.
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External Account: Trade deficit expected to widen; current account deficit projected at 0–1% of GDP in FY26 despite strong remittance growth.
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FX Reserves: Projected to rise to $15.5 billion by December 2025, supported by financial inflows and SBP’s interbank FX purchases.
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Economic Growth: Real GDP growth forecast at 3.25–4.25% in FY26 as earlier rate cuts continue to stimulate activity.
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Risks: MPR flags potential domestic and external risks to the baseline outlook.
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Special Box Items:
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Impact and lag of the 1,100 bps rate cut.
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Overview of cautious monetary stances by global central banks.
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Guide to interpreting inflation fan charts.
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Use of alternative data and machine learning for labor market analysis.
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Applying similar methods to improve agriculture sector assessments.
