Pakistan again holds interest rate at 11pc as floods stoke inflation fears

The State Bank of Pakistan (SBP) maintained its policy rate steady at 11 per cent on Monday for a third straight meeting as policymakers weighed inflation risks from flood-hit crops against a fragile economic recovery.

After slashing the interest rate by 1,000bps from 22pc since June 2024 in seven intervals, the central bank has maintained it at 11pc since May. However, the business community had expressed its intense disappointment over the decision.

“The Monetary Policy Committee decided to keep the policy rate unchanged at 11 per cent in its meeting held on September 15, 2025,” the SBP said on its website, adding that a detailed statement will be released shortly.

After dropping below the 155,000-point mark on Friday, the Pakistan Stock Exchange saw signs of recovery ahead of today’s meeting as it gained 1,138.1 points at 10:24am to reach 155,577.78.

The PSX fluctuated during the day, dropping as low as 154,486.21 points, before surging to 155,452.89 at 3:14pm following the MPC announcement.

Floods in the country, which have caused losses estimated at billions of rupees due to crop and land damage, have added pressure to inflation, particularly in agriculture-based products. There has been a significant price increase for items such as rice and vegetables.

Business stakeholders have expressed divergent views on the impact of floods on supply chains, with some citing delays in interprovincial cargo movement and crop damage, while others insisted supplies of food, fuel, and medicines remain normal.

Last month, Finance Minister Muhammad Aurangzeb noted that there was a “room” for lowering the policy rate by the end of this year, but stressed that it was the purview of the SBP and its MPC.

A recent survey conducted by the Chartered Financial Analyst (CFA) Institute revealed that 92pc of respondents expected the interest rate to remain unchanged, despite trade and industry groups calling for further cuts to stimulate economic activity.

The MPC had kept the rate steady at its last meeting in July, citing potential inflation risks from rising energy prices and geopolitical tensions, even though inflation had been moderating.

More to follow