- Decision
- Maintain
- Rate change
- 0 bps
- policy rate
- 11%
The State Bank of Pakistan’s Monetary Policy Committee left the policy rate unchanged at 11 percent on 15 September 2025, judging the stance appropriate as July–August headline inflation stayed modest (3.0 percent y/y in August after 4.1 percent in July) and core inflation kept easing, even though flood-driven crop losses are expected to lift prices and curb growth in FY26. After cutting the rate by a cumulative 200 bp in January and May, the MPC has now held it steady for two consecutive meetings. It stressed that the real policy rate remains “adequately positive” to anchor the 5–7 percent medium-term inflation target, with interbank conditions aligned to the policy rate. GDP growth is now projected at the lower end of the earlier 3.25–4.25 percent FY26 range as flood damage restrains agriculture and manufacturing despite a 3 percent y/y rebound in large-scale manufacturing and a pick-up in private-sector credit to 14.1 percent y/y; broad money growth eased to 13.9 percent. Externally, the current account swung to a USD 254 mn deficit in July, but foreign-exchange reserves were stable at USD 14.3 bn on 5 September and are expected to climb to USD 15.5 bn by December even though flood-related import needs may widen the FY26 deficit to 0–1 percent of GDP. The MPC cited a “relatively benign” global commodity outlook and some easing in trade uncertainty following revised US tariffs, and reaffirmed the need for continued policy coordination and buffer-building, while cautioning that inflation could exceed the target band for much of H2-FY26 before reverting to target in FY27.
Rate evolution
The State Bank of Pakistan’s policy rate rose by a net 50 basis points over the period, moving from a prolonged hold at 11 percent to a 50 basis point cut in December 2025, a reversal to 11.5 percent in April 2026 and holds at that level in June, July and September. Through October 2025, the Monetary Policy Committee held at 11 percent as inflation stayed moderate and core inflation eased, even as activity recovered and it flagged widening trade deficits, weak inflows, energy-price risks, commodities and flood-related shocks. The December cut reflected inflation averaging within the 5 to 7 percent target range, relatively benign commodity prices and anchored expectations, with the Committee seeing room to support sustainable growth despite sticky core inflation and a difficult export environment.
It held at 10.5 percent in early 2026 as stronger domestic momentum met higher geopolitical uncertainty over energy costs and supply disruptions, before raising the rate by 100 basis points in April to keep expectations anchored and contain second-round effects after inflation and core inflation rose, with inflation projected to stay above the 5 to 7 percent range for most of FY27. The Committee held the policy rate at 11.5 percent on June 15, judging the stance appropriate to guide inflation towards the target range over the medium term, and again on July 27 as lower global oil prices, moderating inflation and contained external pressures improved the outlook, though renewed regional conflict kept risks elevated. On September 14, it maintained the rate at 11.5 percent as headline inflation rose to 11.1 percent in August from 9.2 percent in July, global commodity prices increased and supply disruptions persisted amid the intensifying Middle East conflict, while external pressures remained contained and activity began to recover, with the Committee judging the stance appropriate despite increased uncertainty.