Pakistan's central bank has left its benchmark interest rate unchanged at 11.5 percent, a decision that has drawn sharply contrasting reactions from foreign and domestic business groups. While overseas investors see the move as a necessary safeguard, local chambers warn it will deepen the economic slowdown. Main Developments The State Bank of Pakistan (SBP) held its policy rate steady at 11.5 percent during its latest monetary policy meeting. The decision comes as inflation, though declining, remains above the central bank's target range of 5–7 percent. Overseas Investors Chambers of Commerce and Industry (OICCI) Secretary General M Abdul Aleem praised the pause as prudent. He cited improved macroeconomic conditions but acknowledged that elevated inflation and external risks—including global commodity prices, Middle East tensions, and possible fiscal slippages—still require caution. Read also: Why Pakistan's Middle East Exports Are Stalling In contrast, the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Acting President Saquib Fayyaz Magoon called the decision "contractionary." He argued that keeping rates high will undermine industrial revival, especially when energy tariffs and financing costs are already punishing local businesses. Korangi Association of Trade and Industry President Muhammad Ikram Rajput warned that the high rate could slow recovery in industrial activity, investment, and exports. He noted that rising global crude oil prices, domestic energy costs, and daily petroleum price hikes are compounding pressure on the industrial sector. Background The SBP has maintained a tight monetary stance for months to combat inflation, which stood at 11.1 percent in June—still well above the central bank's comfort zone. The policy rate has remained at 11.5 percent since the last adjustment, reflecting the central bank's caution amid global and domestic uncertainties. Business groups have repeatedly called for a rate cut to single digits, arguing that high borrowing costs stifle production and exports. The FPCCI and other trade bodies have voiced frustration over what they see as a disconnect between the central bank's risk assessment and the ground realities faced by industry. Why It Matters The split between foreign and local stakeholders underscores a fundamental tension in Pakistan's economic policy. Overseas investors, who prioritize stability and inflation control, back the SBP's cautious approach. But domestic firms, grappling with soaring energy costs, high freight rates, and weak demand, see the rate hold as a barrier to recovery. If industrial activity remains constrained, job creation and export competitiveness will suffer—potentially undermining the very macroeconomic gains the SBP seeks to protect. The standoff also raises questions about how long the central bank can balance inflation fighting with the need to stimulate growth. What's Next The SBP's next monetary policy decision will be closely watched, with markets looking for signs of a rate cut if inflation continues to ease. Business groups are expected to intensify their lobbying for a reduction, especially if economic indicators show further softening. Meanwhile, the trajectory of global oil prices and geopolitical developments in the Middle East will remain key variables. Any escalation could force the SBP to maintain its hawkish stance, prolonging the current stalemate between the central bank and the business community.