The State Bank of Pakistan (SBP) has decided to keep its benchmark interest rate unchanged at 11% for the fourth consecutive time, signaling confidence in the country’s economic recovery. This decision, announced on Monday, comes as recent floods had a less severe impact on crops than initially feared, while inflation, growth, and foreign exchange reserves continue to show positive trends. The central bank emphasized that its policy aims to sustain price stability, with earlier rate reductions still influencing the economy. Analysts unanimously anticipated the rate hold, reflecting broader optimism about Pakistan’s macroeconomic conditions. The SBP revised its GDP growth forecast for fiscal year 2026 to the upper half of its earlier 3.25–4.25% range, citing improved crop yields, industrial activity, and high-frequency indicators. However, inflation is expected to remain above the 5–7% target range for the next few months before stabilizing within it in the following fiscal year. Risks such as volatile global commodity prices, energy price adjustments, and uncertainties around food prices were highlighted. The bank also noted that post-flood rehabilitation spending is likely to be managed within budgeted resources, urging fiscal discipline to ensure long-term sustainability. Foreign exchange reserves are projected to rise to $15.5 billion by December 2025 and $17.8 billion by June 2026, supported by official inflows. Since peaking at 22% in June 2024, the SBP has reduced rates by 1,100 basis points, with the last cut in May.