KARACHI: The State Bank of Pakistan (SBP) kept its benchmark policy rate steady at 11 percent on Monday, in line with market expectations. The decision reflects a cautious approach as the central bank balances easing inflation against emerging risks.
In a brief statement, the SBP said its Monetary Policy Committee (MPC) met on September 15 and chose to maintain the current rate. The detailed policy statement will be released later in the day. The policy rate has remained unchanged since May, when the SBP concluded a series of sharp cuts that lowered it from 22 percent to 11 percent in seven steps.
Inflation and economic outlook
According to the SBP, headline inflation dropped to 3.2 percent in June, largely due to lower food prices. Core inflation also softened slightly. However, the outlook remains uncertain following a sharp increase in energy tariffs, particularly gas prices.
The central bank expects inflation to remain within its 5–7 percent target but warned that vigilance is required. Economic activity has shown some recovery after earlier rate cuts, yet the trade deficit is likely to widen because of rising imports and weak global demand.
External stability
The SBP highlighted stronger foreign exchange reserves, now above $14 billion. It also noted that Pakistan’s recent credit rating upgrade has improved its position in international markets, with Eurobond yields and credit default swap spreads narrowing.
Calls for rate cuts
Despite the cautious stance, business groups have voiced concern. The Pakistan Business Forum (PBF) said keeping the rate unchanged is unfair when consumer inflation has fallen to around 4 percent. The forum urged the government and SBP to lower the rate to at least 9 percent to ease costs for businesses and boost investment.
Analysts, however, believe the central bank is waiting for more clarity. Awais Ashraf, Director Research at AKD Securities, said further cuts are possible if inflation stays contained and the rupee remains stable.
For now, the SBP has signalled caution, stressing that while inflation has eased, risks to price stability and external accounts still remain.
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