State Bank Keeps Interest Rate Unchanged

The State Bank of Pakistan on Monday announced its decision to keep the interest rate unchanged at 11 percent. The Monetary Policy Committee decided to keep the policy rate unchanged at 11 percent in its meeting held on October 27, 2025. The MPC decided to keep the policy rate unchanged with majority decision of six out of seven members. One member voted to increase the policy rate by 50 bps.

The MPC observed that the economic impact of recent floods was lower than expected, with minimal supply disruptions and steady agricultural output. Strong performance in high-frequency indicators also showed improved economic momentum. Despite uncertainties from global commodity prices and export challenges, the Committee maintained that the current policy stance supports price stability and sustainable growth.

Pakistan’s macroeconomic indicators show signs of improvement. Real GDP growth for FY25 was revised upward to 3 percent, and Kharif crop estimates remained stable. The country’s foreign exchange reserves continued to rise despite Eurobond repayments, reaching $14.5 billion by mid-October, with projections of $17.8 billion by June 2026. The current account recorded a $110 million surplus in September, and the deficit for Q1-FY26 stood at $594 million. Workers’ remittances remained resilient, while moderate export growth and higher imports reflected recovering demand. The current account deficit is expected to stay within 0 to 1 percent of GDP for FY26.

Fiscal and credit conditions also showed positive trends. Tax revenues grew 12.5 percent year-on-year in Q1-FY26, while private sector credit expanded by 17 percent, driven by growth in textiles, telecommunications, and trade. Inflation is expected to remain above the 5–7 percent target range for a few months due to food and energy price pressures before stabilizing in FY27. The MPC emphasized fiscal discipline, continued policy coordination, and structural reforms to sustain economic recovery and maintain external stability.

This decision reflects the central bank’s cautious approach amid ongoing economic conditions. The policy rate was last changed in May 2025, when it was cut by 100 basis points