KARACHI: Pakistan’s central bank left its key interest rate unchanged at 11% on Wednesday, saying the inflation outlook had worsened a little due to energy price fluctuations, surprising analysts who had expected another cut.

In a Reuters poll this week, all 15 analysts said they expected the SBP to ease, with nine forecasting a 50-basis-points cut, four predicting a deeper 100-basis-points reduction and two projecting a smaller 25-basis-points cut.

The decision came as Pakistan pushes reforms under a $7 billion IMF program and a contractionary budget to curb deficits.

In its Economic Outlook Update on Tuesday, the IMF cut its growth forecast for the fiscal year ending June 2026 to 3.6%, well below the government’s 4.2% target.

“The Monetary Policy Committee (MPC) ... noted that the inflation outlook has somewhat worsened in the wake of higher than anticipated adjustment in energy prices, especially gas tariffs,” the State Bank of Pakistan (SBP) said in a statement.

The panel also noted that the trade deficit was expected to widen further in the fiscal year ending June 2026 amid a pickup in economic activity and a slowdown in global trade.

“Given this macroeconomic outlook and the emerging risks, the MPC considered today’s decision as necessary to ensure price stability,” it said.

The SBP had held rates in June after a 100-basis-points cut in May that resumed easing following a March pause. Since June 2024, it has lowered its policy rate by 1,100 basis points from a record 22% as price pressures receded.

Headline inflation slowed to 3.2 % in June and is projected at 3.5%–4.5% in July, within the SBP’s 5.5%–7.5% target range for the fiscal year ending June 2026.

The government says the economy has stabilized, but analysts warn growth remains fragile and global commodity price swings could still add pressure on prices and external balances.