by Table of Contents
- Introduction
- SBP’s Recent Monetary Policy Decision
- Economic Indicators Influencing the Decision
- Reactions from the Business Community
- Future Outlook and Projections
- Conclusion
1. Introduction
On October 27, 2025, the State Bank of Pakistan (SBP) announced that it will maintain the key interest rate at 11%, marking the fourth consecutive meeting where the rate has remained unchanged.
This decision reflects the central bank’s cautious approach in balancing economic growth with inflationary pressures. By keeping the rate steady, the SBP aims to ensure financial stability while allowing previous monetary measures to take effect.
2. SBP’s Recent Monetary Policy Decision
The SBP’s Monetary Policy Committee convened to evaluate the economic conditions and decide on the policy rate. After careful analysis, the committee concluded that maintaining the rate at 11% was the best approach for the current economic environment.
The central bank emphasized that this decision is intended to preserve price stability, support gradual economic growth, and provide certainty to investors and businesses.
3. Economic Indicators Influencing the Decision
a. Inflation Trends
In September 2025, Pakistan saw inflation rise to 5.6%, up from 3% in August. This increase was largely due to supply-side shocks, including natural disasters and trade challenges. Despite this, core inflation remained relatively stable at 7.3%, suggesting underlying price stability.
b. Economic Growth
The SBP revised its GDP growth forecast for fiscal year 2026 to 3.25%–4.25%, up from the earlier estimate of 3%. Stronger performance in agriculture and manufacturing sectors contributed to this positive adjustment. Large-scale manufacturing grew by 4.4% during July–August 2025, and agriculture was less affected by floods than initially expected.
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c. External Sector Developments
The current account deficit is expected to remain within 0–1% of GDP, supported by stable remittances and stronger exports. Foreign exchange reserves are projected to rise, enhancing the country’s external sector resilience.
4. Reactions from the Business Community
The SBP’s decision received mixed reactions.
Some business organizations expressed disappointment, arguing that the high interest rate restricts growth and investment. They suggested that a rate cut could stimulate industrial activity and reduce the debt burden.
On the other hand, many analysts supported the SBP’s cautious stance, highlighting the importance of controlling inflation while gradually fostering economic growth.
5. Future Outlook and Projections
Looking ahead, the SBP expects inflation to remain above the target range of 5–7% in the short term due to residual supply-side pressures. However, it is anticipated that inflation will stabilize within the target range in the next fiscal year.
For official information and updates on monetary policy decisions, visit the State Bank of Pakistan official website.
The central bank will continue to monitor key economic indicators closely and may adjust the monetary policy to maintain a balance between sustainable growth and price stability.
6. Conclusion
The SBP’s decision to keep the interest rate unchanged at 11% reflects a cautious approach to managing Pakistan’s economic challenges.
While businesses are concerned about borrowing costs, the central bank’s focus remains on long-term stability. The coming months will be critical in assessing the impact of this policy on inflation, investment, and economic growth.
By maintaining a steady interest rate, the SBP aims to navigate a path that ensures both price stability and sustainable economic development.
