SBP leaves policy rate unchanged at 11% despite calls for cuts

KARACHI: The State Bank of Pakistan (SBP) decided on Monday to leave its benchmark policy rate unchanged at 11 percent, a move that came in line with market expectations as the central bank weighed easing inflation against emerging risks in the economy.

In a brief announcement, the SBP said its Monetary Policy Committee (MPC) had met on September 15 and opted to maintain the status quo, with a detailed statement to be released later in the day. The rate has remained unchanged since May, when the bank concluded a series of aggressive cuts that brought it down from 22 percent to the current level in seven steps.

A recent survey by the Chartered Financial Analyst (CFA) Institute showed that 92 percent of respondents expected the rate to stay the same, despite pressure from trade and industry groups for deeper cuts to spur growth.

Inflation outlook and economic concerns

According to the SBP, headline inflation slowed to 3.2 percent in June, mainly because of lower food prices, while core inflation also eased slightly. However, the outlook has become less certain after a steeper-than-expected hike in energy tariffs, particularly gas prices.

The bank expects inflation to stabilise within its 5–7 percent target range but stressed that vigilance was needed.

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The central bank noted that economic activity is showing signs of improvement, helped by earlier rate cuts. Yet, risks remain: the trade deficit is likely to widen in the current fiscal year due to rising imports and weaker global trade momentum.

The SBP also pointed to stronger foreign exchange reserves, now above $14 billion, and said Pakistan’s recent credit rating upgrade has improved its standing in global markets by lowering Eurobond yields and credit default swap spreads.

Industry voices call for relief

While the SBP has opted for caution, business groups have been vocal in their criticism. The Pakistan Business Forum (PBF) argued that keeping interest rates high is unjustified when consumer inflation is down to around 4 percent. It urged the government to push for a cut to at least 9 percent to help businesses manage costs and encourage investment.

Analysts, meanwhile, believe that further easing could come if the rupee remains stable and inflationary pressures stay contained. “Stability in the currency market along with clarity on the inflation front would allow the SBP to cut interest rates into single digits,” said Awais Ashraf, director research at AKD Securities.

For now, however, the central bank has chosen caution, signalling that while the worst of inflation may be behind, risks to price stability and external accounts are far from over.

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