SBP Governor at AlUla 2026: Why Interest Rates Remain at 10.5% Despite Lower Inflation. -

Speaking at the AlUla Conference for Emerging Market Economies on Sunday, February 8, 2026, State Bank of Pakistan (SBP) Governor Jameel Ahmad stood firm on the decision to maintain the policy rate at 10.5%. Despite headline inflation falling to 5.6% in December—well within the 5–7% target range—the Governor emphasized that a tight monetary stance is necessary to guard against anticipated global and local developments that could reignite price hikes.

Key Insights from the Governor’s Address

The Governor provided a candid look into the central bank’s current strategy:

The Preemptive Challenge: Ahmad noted that taking “preemptive actions” before a crisis hits is the hardest part of central banking, especially when stakeholders are pushing for lower rates to boost growth.
Global & Local Pressures: High real interest rates are essential to counter potential destabilizing factors that are “going to come” down the line, ensuring the economy remains resilient.
Market Credibility: The SBP has successfully regained trust, with professional analysts now aligning their inflation forecasts for the next two years with the bank’s 5–7% projection.
Sustainable Resilience: The current cautious approach is designed to help Pakistan avoid unsustainable “boom-bust” growth paths while building foreign exchange buffers, which are projected to reach $18 billion by June 2026.

Market Reaction

While the business community remains hopeful for future cuts to lower the cost of SME lending and industrial expansion, the SBP remains focused on its primary objective of price stability. The Governor admitted it is often difficult to convince economic agents to “buy into the idea” of high rates when immediate inflation appears low.