The State Bank of Pakistan (SBP) announced on Monday that it would maintain the policy rate at 11 percent, signaling a cautious approach amid persistent inflationary pressures and slow economic recovery. The decision came after the Monetary Policy Committee (MPC) meeting held on October 27, 2025, where members voted to keep the key interest rate unchanged for another term.
In an official post shared on social media platform X, the central bank stated that the MPC had decided to hold the policy rate steady at 11 percent, a level that has remained unchanged since May. The decision reflects the central bank’s concern over recent economic developments, including flood-induced disruptions in major agricultural regions and renewed inflationary trends that continue to threaten price stability.
Market analysts had widely anticipated this move. According to economists and financial experts, the central bank’s decision was largely driven by two key factors — the recent floods that damaged crops and infrastructure in parts of Khyber Pakhtunkhwa and Punjab, and a noticeable increase in food prices that has added pressure to overall inflation.
The latest data from the Sensitive Price Index (SPI) revealed a five percent week-on-week increase for the period ending October 23, with food items contributing significantly to the rise. Analysts warned that the impact of these flood-related supply chain disruptions is likely to be reflected in the Consumer Price Index (CPI) in the coming months, potentially keeping inflation elevated for a prolonged period.
Given these circumstances, the SBP refrained from adjusting the policy rate despite repeated calls from trade and industrial sectors for a reduction to stimulate economic activity. Business leaders argue that high borrowing costs continue to restrict investment and production, particularly in manufacturing and agriculture, two sectors already struggling under the burden of rising costs and weak demand.
Despite the unchanged rate, the central bank remains under pressure to balance between controlling inflation and supporting growth. Data from the SBP indicates that private-sector credit demand has stayed subdued, with businesses showing reluctance to take new loans. Economists note that this trend, coupled with low investment levels, signals underlying weaknesses in the economy that could persist if borrowing remains costly.
Over the past three years, Pakistan’s economic growth has stagnated, further complicating the country’s social and fiscal challenges. Nearly 97 million people are now estimated to be living below the poverty line, underscoring the need for more effective policies to promote inclusive and sustainable development.
Government efforts to revive growth through structural reforms and investment incentives have struggled to gain traction, particularly in the face of rising inflation, a wide fiscal deficit, and ongoing external financing constraints. Industry representatives continue to emphasize that without easing borrowing costs and reducing regulatory burdens, businesses will find it difficult to compete both domestically and globally.
While the SBP’s latest decision is consistent with market expectations, it also highlights the delicate balancing act facing policymakers — controlling inflation without stifling growth. With global and domestic uncertainties still shaping Pakistan’s financial landscape, the next few months will be critical in determining whether the current policy stance can stabilize prices while supporting gradual recovery.
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