The State Bank of Pakistan (SBP) is set to hold its next Monetary Policy Committee (MPC) meeting on October 27, 2025, to review the country’s benchmark policy rate. This decision is highly anticipated by investors, economists, and market participants as it will shape Pakistan’s economic and inflation outlook for the coming months.
According to a survey conducted by Topline Securities, a large majority of market participants — around 85 percent — expect the central bank to maintain the policy rate at its current level. This reflects a growing consensus among analysts that the SBP is likely to adopt a cautious stance amid persistent inflationary pressures caused by the recent floods and their impact on agricultural output. In comparison, the previous survey had shown 72 percent expecting no change, suggesting that confidence in policy stability has increased.
The remaining 15 percent of respondents anticipate a rate cut, with 5 percent forecasting a modest 25 basis point (bps) reduction, while 10 percent predict a deeper 50 bps cut. However, most experts believe the probability of such adjustments remains low, given the recent surge in inflation linked to supply disruptions and food shortages in key flood-affected regions.
Historically, natural disasters have significantly influenced Pakistan’s monetary decisions. During the 2010–2011 floods, major crop yields such as wheat, rice, and cotton declined by 3 to 18 percent, while rice output alone fell by almost 30 percent. This year’s floods have once again disrupted agricultural activity, with economists projecting a 10 percent decline in cotton and rice production. The reduced supply is expected to push food prices higher, sustaining inflation in the short term and limiting the central bank’s flexibility to lower interest rates.
Analysts also expect the policy rate to remain steady at 11 percent through most of FY26. They argue that maintaining a stable rate environment would help balance inflation management with economic stability. Forecasts suggest inflation could rise to between 8 and 9 percent in the final quarter of FY26 (April–June) before easing to a range of 6 to 7 percent. Despite elevated rates, Pakistan’s non-oil imports have continued to grow, signaling that domestic demand and business activity remain resilient enough to justify a cautious monetary stance.
Topline’s research further highlights expectations for key economic indicators in FY26. About 66 percent of respondents anticipate the policy rate will remain unchanged at 11 percent through December 2025, while 34 percent foresee a slight decline to 10 percent. Regarding inflation, 42 percent expect it to average between 6 and 7 percent, whereas 32 percent believe it could exceed that range.
On the currency front, the poll indicates that 44 percent of analysts expect the Pakistani rupee to trade between Rs282 and Rs285 per US dollar by December 2025, while others project a slightly weaker range of Rs285 to Rs290. Looking ahead, analysts forecast the rupee to close between Rs283 and Rs288 by the end of 2025 and potentially move toward Rs292 to Rs297 by June 2026.
As the MPC prepares to meet, the central bank faces the complex task of balancing inflation control, economic recovery, and exchange rate stability. While most observers expect no immediate change in the policy rate, the meeting’s tone and guidance will be closely monitored for signals on future monetary adjustments, especially as Pakistan navigates through climate-related shocks and slow but steady economic recovery.
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