The State Bank of Pakistan (SBP) announced on Monday that its Monetary Policy Committee (MPC) has kept the interest rate unchanged at 11 percent.
Most analysts and researchers had already anticipated that the central bank would keep the policy rate unchanged.
The State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC) decided to keep the policy rate unchanged at 11 percent in its meeting on Monday.
The Committee noted that headline inflation rose significantly to 5.6 percent in September, whereas core inflation remained unchanged at 7.3 percent. The MPC assessed that the impact of the recent floods on the broader economy appears to be somewhat lower than anticipated at the time of its previous meeting.
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The crop losses are likely to be contained, whereas supply disruptions turned out to be minimal. Moreover, economic activity gained further momentum, as depicted by robust growth in high frequency economic indicators. Based on these developments, the overall macroeconomic outlook has improved from the previous assessment.
At the same time, the Committee noted uncertainties around this outlook arising from volatile global commodity prices; challenging export prospects amidst the evolving tariff dynamics; and potential domestic food supply frictions.
In this backdrop, and given the still-unfolding impact of the earlier reduction in the policy rate, the MPC viewed today’s decision as appropriate to maintain the ongoing price stability.
The Committee noted some key developments since its last meeting. First, real GDP growth in FY25 was revised by PBS to 3 percent from the previous estimate of 2.7 percent.
Second, initial estimates of major Kharif crops by the Federal Committee on Agriculture remained close to last year’s production, despite the recent floods. Third, despite the repayment of a $500 million Eurobond, SBP’s FX reserves continued to increase.
Fourth, Pakistan reached a staff-level agreement with the IMF on the EFF and the RSF reviews. Fifth, inflation expectations of both consumers and businesses eased in the latest SBP-IBA sentiment surveys. Lastly, global commodity price movements depicted mixed trends, with oil prices displaying heightened volatility.
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In light of these developments, the MPC viewed the real policy rate to be adequately positive to stabilize inflation within the target range of 5–7 percent over the medium term. The Committee also reiterated the important role of the continued build-up in external and fiscal buffers to absorb future shocks and in facilitating the ongoing pickup in economic activity, without adding excessive pressures on inflation and the external account.
The MPC emphasized the importance of continuing coordinated and prudent monetary and fiscal policies, and undertaking the required structural reforms, to ensure ongoing progress towards sustainable economic growth.
