The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP), in line with market expectations, has decided to keep the policy rate unchanged at 11% on Monday.
At its previous meeting on September 15, 2025, the MPC decided to keep the policy rate unchanged at 11%, citing the adverse impact of recent floods on the near-term macroeconomic outlook.
Market experts had widely expected the central bank to maintain the status quo in today’s meeting.
Arif Habib Limited (AHL) anticipated no change in the policy rate, “mainly due to the recent rise in inflation, a marginal widening current account deficit, and the early stage of domestic recovery”.
AHL noted that economic momentum is slowly gaining pace, with large-scale manufacturing growing by 9% YoY in July. However, while a rate cut could further support this recovery, the SBP may prefer to defer any easing for now, “allowing stability itself to nurture the ongoing momentum in the real sector”.
Analysts at Topline Securities echoed similar views, citing a higher inflation pattern emanating from recent floods and rising import levels.
“We expect the central bank to maintain the status quo on the interest rate front in FY26, as during 2HFY26, the inflation numbers in the last few months (Apr, May and Jun) might cross 8- 9% before reverting to the normalised range of 6-7%.
“Furthermore, non-oil import numbers are also on a rising trajectory despite higher interest rates of 11% and real rate of over 500- 600bps. This signals SBP might continue with a status quo approach,” Topline said.
Similarly, a Reuters poll also found that the central bank would keep its key interest rate unchanged, as analysts said flood-driven food inflation and a low base effect are likely to limit the scope for further monetary easing.
“An elevated inflation reading in September, incorporating the impact of the recent floods, is likely to incline the MPC to keep the policy rate at the same level,” said Fawad Basir, head of research at KTrade, adding that the next cut was likely in the last quarter of FY26, starting July 2026.
Earlier, Governor SBP Jameel Ahmad, in an interview with Bloomberg, said that the economic fallout from recent floods would determine future policy rate cuts.
Previous MPC meeting
In its September meeting, the MPC kept the policy rate unchanged at 11%. The decision was also in line with market expectations.
The committee, at that time, noted that inflation remained relatively moderate in both July and August, whereas core inflation continued to decline at a slower pace.
Since the last MPC meeting, several key economic developments have occurred.
The rupee has appreciated by 0.2%, while petrol prices have declined by 0.6%.
Internationally, oil prices have reduced by nearly 2% since the last MPC, hovering around $62 per barrel.
Pakistan’s headline inflation clocked in at 5.6% on a year-on-year (YoY) basis in September 2025, according to the Pakistan Bureau of Statistics (PBS) data.
In addition, Pakistan’s current account (C/A) posted a significant surplus of $110 million in September, a sharp contrast against $52 million deficit recorded in the same month last fiscal, data released by the SBP showed.
Foreign exchange reserves held by the central bank rose by $14 million on a weekly basis, reaching $14.45 billion as of October 17, 2025.
According to the central bank, total liquid foreign reserves stood at $19.85 billion, while net foreign reserves held by commercial banks were recorded at $5.40 billion.
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