The State Bank of Pakistan (SBP) is scheduled to convene its Monetary Policy Committee (MPC) meeting today, where the decision on the key policy rate will be made. The meeting comes at a critical time when the country is dealing with heightened inflationary pressures, particularly following recent flooding that has damaged agricultural production and disrupted supply chains.
In its previous monetary policy meeting on June 30, 2025, the MPC opted to maintain the policy rate at 11 percent. That decision was based on the inflation outlook at the time, which had worsened primarily due to unexpected adjustments in energy prices, with gas tariffs highlighted as a major contributor. The committee emphasized that while inflation was easing in some segments, the structural impact of energy prices required cautious management to avoid destabilizing the recovery trajectory.
Market observers now anticipate that the SBP will likely maintain the policy rate at its current level once again. Analysts point to the immediate inflationary risks stemming from recent floods, which have destroyed crops, disrupted logistics, and created uncertainty in the supply of essential commodities. This situation is expected to put upward pressure on food prices, which in turn could influence overall inflation in the months ahead.
A survey conducted by Topline Securities revealed that 72 percent of market participants expect the policy rate to remain unchanged in today’s meeting. The survey noted that the outlook for food inflation has worsened significantly due to anticipated crop losses, particularly in key staples such as wheat, rice, and cotton. The report highlighted that disruptions in agricultural output are likely to feed into higher import demand, increasing pressure on the current account as well.
Historical data provides further perspective. During the floods of 2010–2011, Pakistan witnessed a decline in cultivated areas for major crops ranging between 3 and 18 percent. Rice production alone was affected by around 30 percent in FY11, according to the Economic Survey of Pakistan. Analysts suggest that the current situation may mirror some of those past dynamics, with the potential to exacerbate both food shortages and external sector vulnerabilities.
Despite these challenges, some encouraging macroeconomic indicators remain in place. Foreign exchange reserves have stabilized in recent months, and remittance inflows have remained resilient. Meanwhile, large-scale manufacturing has shown signs of recovery, and private sector credit growth has gained momentum. However, these gains could face setbacks if the impact of the floods lingers and translates into broader inflationary pressures.
The MPC’s decision today will be closely monitored by financial markets, businesses, and consumers alike. Maintaining the rate at 11 percent would signal the central bank’s intention to balance economic stability with inflation management. Conversely, any shift in the rate would reflect a recalibration in response to evolving economic risks.
As Pakistan manages the complex interplay of inflation, growth, and external pressures, the SBP’s stance will play a crucial role in shaping monetary conditions in the months ahead.
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