Karachi: The State Bank of Pakistan (SBP) on Monday decided to keep its key policy rate unchanged at 11% for the fourth consecutive monetary policy meeting, citing an improved growth outlook and a milder-than-expected impact of the recent floods on the economy.
The decision aligned with market expectations, as economists and analysts had widely anticipated a pause in the monetary easing cycle. The central bank said that economic activity has gained further momentum, supported by strong growth in high-frequency indicators and limited disruptions to agricultural output.
“The improvement in the growth outlook, compared to earlier assessments, was a key reason for extending the pause in the SBP’s monetary easing cycle since June,” the bank said in its monetary policy statement.
The SBP revised its gross domestic product (GDP) growth projection for the fiscal year 2026 to the upper end of the previously estimated range of 3.25% to 4.25%. The Monetary Policy Committee (MPC) noted that the real policy rate remains sufficiently positive to help stabilise inflation within the target range of 5–7% over the medium term.
Since June 2024, the SBP has cut the policy rate by a cumulative 1,100 basis points. It has held the rate steady at 11% through its last four meetings as policymakers assess the impact of earlier reductions.
The central bank also acknowledged several external and domestic risks, including volatile global commodity prices, uncertainty over future energy price adjustments, and potential food supply challenges. It emphasised the importance of maintaining strong external and fiscal buffers to manage future shocks while supporting economic activity.
Inflation, which rose to 5.6% in September from 3% in August, was attributed to temporary food and energy price pressures linked to recent floods and supply chain disruptions. The SBP expects inflation to exceed the upper bound of its target range for a few months in the second half of FY26 before easing back to the target range in FY27.
According to the MPC, both consumer and business inflation expectations have softened in recent surveys, reflecting improved sentiment compared to previous assessments. The central bank, however, warned that the inflation outlook remains subject to risks from global commodity price swings and uncertainty in domestic food markets.
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