Pakistan holds key rate at 11% as geopolitical tensions stoke inflation risks
ISLAMABAD :Pakistan's central bank kept its key interest rate unchanged at 11 per cent on Monday, in line with expectations, as the conflict between Israel and Iran and volatile global oil prices added upside risks to inflation.
The State Bank of Pakistan briefly paused its easing cycle in March after cutting rates by 10 per centage points from a record high of 22 per cent in June 2024. The SBP announced another 100-basis-point cut in May, bringing the key rate to 11 per cent.
Eleven out of 14 analysts in a Reuters poll had forecast the SBP would hold the rate steady, citing inflationary risks from Israel's recent military strikes on Iran and their impact on global commodity markets.
The bank's Monetary Policy Committee said in a statement announcing the decision that it expected some near-term volatility in inflation and for it to gradually to edge up and stabilise in the 5-7 per cent target range.
"This outlook, however, remains subject to multiple risks emanating from potential supply-chain disruptions from regional
geopolitical conflicts, volatility in oil and other commodity prices, and the timing and magnitude of domestic
energy price adjustments," the MPC said.
Headline inflation rose to 3.5 per cent in May, exceeding the finance ministry's projection of up to 2 per cent. The central bank expects average inflation to range between 5.5 per cent and 7.5 per cent for the current fiscal year, which ends this month.
"The decision to hold rates was not surprising given the uncertain geopolitical outlook with oil prices spiking around 15 per cent," said Mustafa Pasha, Executive Director at Karachi-based Lakson Investments.
"Additionally, it gives the SBP time to assess the impact of the budget and upcoming gas/electricity tariff revisions on inflation and the external account."
The decision also comes on the heels of Pakistan's contractionary budget, in which it cut total spending by 7 per cent and set a GDP target of 4.2 per cent for fiscal year 2025-26.
The government said the $350 billion economy is stabilising under a $7 billion IMF programme, though analysts remain wary of external and fiscal pressures.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Straits Times
an hour ago
- Straits Times
US bolsters Trump's Middle East military options by moving refueling aircraft, officials say
U.S. President Donald Trump sits in the Oval Office at the White House, in Washington, D.C., U.S., June 10, 2025. REUTERS/Nathan Howard WASHINGTON - The U.S. military has moved a large number of refueling aircraft to Europe to provide options to President Donald Trump as Middle East tensions erupt into conflict between Iran and Israel, two U.S. officials told Reuters on Monday, speaking on condition of anonymity. The officials also said the U.S. aircraft carrier Nimitz was heading to the Middle East, in what one of them said was a pre-planned deployment. The Nimitz can hold 5,000 personnel and more than 60 aircraft, including fighter jets. Taken together, the deployments suggest the United States is greatly strengthening its air power for potentially sustained operations as Iran and Israel trade blows in unprecedented open warfare. Israel began bombing Iran on Friday, saying Tehran was on the verge of building a nuclear bomb. Since then, Iran and Israel have launched large salvos against each other, killing and wounding civilians and raising concerns about a broader regional conflict. AirNav systems, a flight tracking website, said more than 31 U.S. Air Force refueling aircraft - primarily KC-135s and KC-46s - left the United States on Sunday, heading east. The U.S. officials declined to comment on the number of aircraft. The Pentagon referred Reuters to the White House, which did not immediately respond to a request for comment. "The sudden eastward deployment of over two dozen U.S. Air Force tankers is not business as usual. It's a clear signal of strategic readiness," said Eric Schouten at Dyami Security Intelligence. "Whether it's about supporting Israel, preparing for long-range operations, logistics is key, this move shows the U.S. is positioning itself for rapid escalation if tensions with Iran spill over." AirNav systems said the U.S. military flights had landed in Europe, including at Ramstein air base in Germany and airports in the United Kingdom, Estonia, and Greece. The United States has been cautious so far, helping Israel knock down incoming missiles. Trump vetoed an Israeli plan in recent days to kill Iran's Supreme Leader Ayatollah Ali Khamenei, two U.S. officials told Reuters on Sunday. One of them said the United States did not support going after Iran's political leadership, as long as Americans were not being targeted. Trump has lauded Israel's offensive and warned Tehran not to widen its retaliation to include U.S. targets. A third U.S. official, speaking on condition of anonymity, declined to comment on the tanker movement but stressed that U.S. military activities in the region were defensive in nature. Another source familiar with the issue said the United States has told regional countries that it is making defensive preparations and would switch to offensive operations if Iran strikes any U.S. facilities. The United States already has a sizeable force in the Middle East, with nearly 40,000 troops in the region, including air defense systems, fighter aircraft and warships that can help bring down missiles. Last month, the Pentagon replaced B-2 bombers with another type of bomber at a base in the Indo-Pacific that is seen as being an ideal location to operate in the Middle East. The B-52 bombers can carry large bunker-busting munitions, which experts say can be used against Iran's nuclear facilities. REUTERS Join ST's Telegram channel and get the latest breaking news delivered to you.
Straits Times
an hour ago
- Straits Times
G7 leaders agree on strategy to protect critical mineral supply, draft document says
FILE PHOTO: Raw Rare Earth ore waiting to be processed at Vital Metals in Saskatoon, Saskatchewan, Canada January 16, 2023. REUTERS/Nayan Sthankiya/File Photo G7 leaders agree on strategy to protect critical mineral supply, draft document says KANANASKIS, Alberta - Group of Seven leaders on Monday provisionally agreed on a strategy to help protect the supply of critical minerals and bolster their economies, according to a draft statement seen by Reuters. The draft, which a source said had not yet been approved by U.S. President Donald Trump, also said minerals markets should reflect the real costs of responsible extraction, processing, and trade of critical minerals. China's decision in April to suspend exports of a wide range of critical minerals and magnets disrupted supplies needed by automakers, computer chip manufacturers and military contractors around the world. Trump last week said Chinese President Xi Jinping agreed to let rare earth minerals and magnets flow to the United States. Rare earths and other critical minerals, though, remain a source of leverage for Beijing. "Non-market policies and practices in the critical minerals sector threaten our ability to acquire many critical minerals," the draft said. "Recognizing this threat to our economies, as well as various other risks to the resilience of our critical minerals supply chains, we will work together and with partners beyond the G7 to swiftly protect our economic and national security." This included anticipating critical minerals shortages, coordinating responses to deliberate market disruption, and diversifying mining, processing, manufacturing, and recycling, it said. REUTERS Join ST's Telegram channel and get the latest breaking news delivered to you.
Straits Times
3 hours ago
- Straits Times
US bolsters military options for Trump with refueling aircraft, officials say
U.S. President Donald Trump sits in the Oval Office at the White House, in Washington, D.C., U.S., June 10, 2025. REUTERS/Nathan Howard US bolsters military options for Trump with refueling aircraft, officials say WASHINGTON - The U.S. military has moved a large number of refueling aircraft to Europe to provide options to President Donald Trump as Middle East tensions soar, two U.S. officials told Reuters on Monday, speaking on condition of anonymity. AirNav systems, a flight tracking website, said that on Sunday evening more than 31 U.S. Air Force refueling aircraft -- primarily KC-135s and KC-45s -- left the United States, heading east. The officials declined to comment on the number of aircraft but said the U.S. aircraft carrier Nimitz was heading to the Middle East, in what one of them said was a pre-planned deployment. The Nimitz can hold 5,000 personnel and more than 60 aircraft, including fighter jets. Taken together, the deployments suggest the United States is greatly strengthening its air power for potentially sustained operations as Iran and Israel trade blows, in unprecedented open warfare that is seeing civilian casualties mount on both sides. "The sudden eastward deployment of over two dozen U.S. Air Force tankers is not business as usual. It's a clear signal of strategic readiness," said Eric Schouten at Dyami Security Intelligence. "Whether it's about supporting Israel, preparing for long-range operations, logistics is key, this move shows the U.S. is positioning itself for rapid escalation if tensions with Iran spill over." The United States has been cautious so far, helping Israel knock down incoming missiles. But Trump vetoed an Israeli plan in recent days to kill Iran's Supreme Leader Ayatollah Ali Khamenei, two U.S. officials told Reuters on Sunday. One of them said the United States did not support going after Iran's political leadership as long as Americans weren't being targeted. A third U.S. official, speaking on condition of anonymity, declined to comment on the tanker movement but stressed that U.S. military activities in the region were defensive in nature. The Pentagon referred Reuters to the White House, which did not immediately respond to a request for comment. REUTERS Join ST's Telegram channel and get the latest breaking news delivered to you.
