SBP Retains Policy Rate at 11% Amid Floods

On Monday, the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) opted to retain the policy rate at 11%, aligning seamlessly with market expectations.

This resolution echoes the July 30, 2025, meeting, where the rate was similarly held at 11% amid escalating energy costs and inflationary pressures. Analysts highlighted that recent floods could spike food prices and overall inflation, warranting the cautious approach.

A Topline Securities survey revealed that 72% of respondents foresaw no shift in the policy rate, while Arif Habib Limited pointed to looming inflationary pressures, fiscal concerns, and current account risks as grounds for the status quo.

Since the prior MPC meeting, the Pakistani rupee appreciated by 0.5%, petrol prices dipped 3%, and international oil prices plummeted nearly 10% to approximately $63 per barrel.

Pakistan’s headline inflation softened to 3% year-on-year in August 2025, down from 4.1% in July, while the current account recorded a $254 million deficit in July, reversing a $328 million surplus in June.

SBP’s foreign exchange reserves climbed $34 million to $14.34 billion as of September 5, 2025, with total liquid reserves at $19.68 billion and net reserves held by commercial banks at $5.34 billion.