Karachi, September 15, 2025 – The State Bank of Pakistan (SBP) is widely expected to maintain its benchmark policy rate at 11 percent in the upcoming Monetary Policy Committee (MPC) meeting scheduled for Monday (today).
Analysts believe that despite easing inflation and some improvement in external accounts, risks linked to fiscal pressures, flood-related disruptions, and the current account outlook make a cautious approach necessary.
According to Arif Habib Limited, the central bank is unlikely to change its policy stance at this juncture. The headline Consumer Price Index (CPI) slowed to 3.0% in August 2025 from 4.1% in July, while core inflation remained steady at 7.3%. Even so, for FY26, average inflation is projected to stay slightly above the SBP’s medium-term target band of 5–7%, largely due to food supply shocks caused by floods. Early September’s Sensitive Price Index (SPI) has already shown double-digit increases in essentials such as wheat, tomatoes, and onions.
On the external front, the current account deficit narrowed to USD 254 million in July 2025, compared with USD 348 million a year earlier. The Pakistani rupee appreciated 0.7% in FYTD, and S&P recently upgraded Pakistan’s credit rating to B- (Stable). However, imports of agricultural commodities and cotton may rise to compensate for flood-related damages, potentially reintroducing external pressures.
Large-Scale Manufacturing (LSM) activity reflected mixed trends, with June 2025 output rising 4.1% year-on-year but contracting on a monthly basis. For FY25 overall, LSM declined slightly by 0.7%. Analysts expect recovery in industrial activity as reconstruction efforts and improving demand gradually support growth.
Bond market movements also reinforce expectations of no change in the policy rate. Yields across most tenors have remained broadly stable, with only marginal shifts in both short-term T-bills and longer-tenure Pakistan Investment Bonds (PIBs).
In summary, market consensus suggests the SBP will hold the policy rate steady, preferring stability over aggressive easing amid lingering inflationary and fiscal challenges.