The (SBP) is widely expected to maintain its benchmark policy rate at 11% in the upcoming (MPC) meeting scheduled for October 27, 2025. The decision comes amid a backdrop of renewed inflationary pressure triggered by recent floods, alongside gradual signs of economic recovery.
According to a survey conducted by (AHL), an overwhelming majority of market participants—87.5%—anticipate that the SBP will keep the policy rate unchanged, while only 12.5% foresee a possible 50-basis-point cut. AHL stated that the central bank is likely to prioritize price stability in the near term given the uptick in inflation, a marginal widening of the current account deficit, and the early stage of domestic economic recovery.
In its previous MPC meeting, the SBP had opted to hold the policy rate steady at 11%, citing the uncertain macroeconomic impact of widespread flooding across key agricultural regions. Governor recently reiterated in an interview with that any future rate adjustments would depend on the economic implications of the floods, suggesting that the central bank intends to proceed cautiously.
Inflation dynamics have become more complex in recent months. Headline inflation rose sharply from 3.0% in August 2025 to 5.6% in September 2025, primarily driven by flood-related food supply disruptions. As a result, AHL now projects the average inflation for FY26 to slightly exceed 7%, pushing it just beyond the SBP’s targeted range of 5–7%. Core inflation, however, remained stable at 7.3%, indicating that underlying price pressures remain contained for now.
“The overall outlook supports a cautious approach,” AHL noted in its report, adding that while domestic recovery indicators are improving, the central bank will likely prioritize stability over short-term growth acceleration.
On the external front, conditions remain stable, though analysts stress the importance of monitoring import trends and foreign exchange reserves closely. The latest industrial data points toward improving momentum, with large-scale manufacturing growing 9% year-on-year in July. AHL highlighted that this steady industrial rebound underscores the need for policy consistency to sustain business confidence.
Topline Securities shared a similar view, predicting that the SBP will maintain the current rate in light of higher inflation patterns and rising non-oil imports. The brokerage firm observed that despite elevated borrowing costs, non-oil import demand continues to grow, suggesting that the central bank may prefer to preserve its current stance to avoid reigniting inflationary pressures.
In a recent Topline poll, 85% of market participants expected no change in the policy rate—up from 72% in the previous survey—while 15% anticipated a rate cut of 25 to 50 basis points. The firm added that inflation could temporarily exceed 8–9% in the latter half of FY26 before easing back toward the 6–7% range, reinforcing the case for a continued “wait and see” approach.
Meanwhile, bond market indicators also support expectations of a status quo decision, with yields across the curve showing little movement. Analysts believe this stability reflects growing investor confidence in the central bank’s measured policy direction.
Overall, while Pakistan’s economy shows early signs of stabilization, the combination of flood-related inflation, gradual recovery, and external vulnerabilities has reinforced expectations that the SBP will prioritize continuity over change in its upcoming decision.
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