Uncertainty in Gulf likely to keep policy rate unchanged

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KARACHI: The State Bank is widely expected to keep its policy interest rate unchanged at its monetary policy meeting on Monday (July 27), as policymakers are unlikely to alter the benchmark rate amid heightened uncertainty following the Gulf war.

Economists, researchers and analysts are still assessing the war’s impact on Pakistan, but there is broad agreement that it pushed global oil prices above $100 per barrel, affecting economies worldwide, including Pakistan.

Analysts closely tracking the economy say it would be difficult to maintain macroeconomic stability with sluggish growth. They believe the State Bank is unlikely to risk undermining that stability by changing the policy rate.

Despite the surge in global oil prices, which has intensified inflationary pressures, the government and the State Bank hope to keep average CPI inflation within the 7-8pc range in FY27. While some analysts question this outlook, most believe it will depend on developments in the region. The US strikes on Iran continued, while Iran also targeted American bases in several Gulf countries.