KARACHI: Pakistan’s central bank announced on Monday it had kept the key interest rate unchanged at 11 percent for a third consecutive time, with analysts describing the State Bank of Pakistan’s (SBP) move as “cautious” as devastating floods threaten to spike food prices in the country.
Floods in Pakistan’s eastern Punjab province since late August have inundated thousands of acres of lands, destroyed standing crops and killed livestock. Economists and traders have warned that the floods, which are now moving downstream toward the southern Sindh province, may elevate food and overall inflation in the coming months due to crop losses and supply chain disruptions.
“The Monetary Policy Committee decided to keep the policy rate unchanged at 11 percent in its meeting held on September 15, 2025,” the SBP said in a statement.
The central bank said it would issue a detailed statement on the decision later.
“As per market consensus, the SBP is staying cautious amid rising inflation due to flood affected surge in food prices,” Muhammad Saad Ali, head of research at Lucky Investments Ltd., told Arab News.
Ali said it was possible for the central bank to slash the key interest rate by around 50-100 basis points but not until the year’s end.
Amreen Soorani, head of research at Al Meezan Investment Management, noted that recurring inflation levels have limited the real interest rate to 2.5 percent, leaving lesser room for monetary easing from here.
“In addition to that, the rising risks of impact from floods on food prices are on the cards as well,” Soorani said.
In its last announcement on Jul. 30, the central bank left its key interest rate unchanged at 11 percent, going against analyst expectations. In a Reuters poll they had forecast a reduction of 50 to 100 basis points.
The bank said the inflation outlook had deteriorated due to rising energy prices.
