Decision made during Monetary Policy Committee meeting of central bank
\n Islamabad
\nThe Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) on Monday announced keeping the policy rate unchanged at 11%.
\nThis marks the third straight MPC meeting where the central bank has extended a pause in monetary easing as policymakers weighed inflation risks from flood-hit crops against a fragile economic recovery.
\n\u201cThis temporary yet significant flood-induced supply shock, particularly to the crop sector, may push up headline inflation and the current account deficit from earlier expectations in FY26,\u201d the central bank said in its statement.
\nIt, however, added that the economy is on a significantly stronger footing to withstand the negative fallout of the ongoing floods as compared to previous major flood events.
\nThe central bank\u2019s move was expected as 13 of 14 analysts that Reuters surveyed forecast the SBP would hold its policy rate at 11%.
\nSince late June, floods have swamped Punjab\u2019s farmland, disrupting supply chains and stoking inflation fears, with nearly 950 people killed, 6,500 livestock lost, 8,200 houses destroyed and 4.5 million displaced as waters move south.
\nSana Tawfik, head of research at Arif Habib Limited, said agricultural losses could shave around 0.2% off gross domestic product growth, though reconstruction may provide some offset.
\nAnalysts said flood-driven supply shocks, especially in wheat, rice and vegetables, could keep inflation above the central bank\u2019s 5\u20137% target.
\nSaad Hanif of Ismail Iqbal Securities said food inflation could face \u201ctemporary shocks\u201d, with wheat prices up about 50% in a month.
\nInflation eased to 3% in August from 4.1% in July, but the finance ministry, which projected 4% to 5%, warned crop losses and extreme weather could soon push prices higher. \u201cManufacturers have also raised selling prices, citing higher fuel and transport costs and delays in input deliveries caused by flooding,\u201d said Ahmad Mobeen, senior economist at S&P Global Market Intelligence.
\nThe SBP has cut rates by 1,100 basis points since June 2024, when they stood at a record 22% after inflation peaked near 40% in 2023. It last cut by 100 bps in May, after a March pause, and held steady in June amid oil price pressures from Middle East tensions. Still, some see room for cuts. \u201cReal interest rates are still high enough to allow for a cut, especially with the Fed turning dovish, but the floods are inflationary, particularly for food,\u201d said Ammar Habib, an independent analyst.<\/p>\n","protected":false},"excerpt":{"rendered":"
Decision made during Monetary Policy Committee meeting of central bank Islamabad The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) on Monday announced keeping the policy rate unchanged at 11%. This marks the third straight MPC meeting where the central bank has extended a pause in monetary easing as policymakers weighed inflation […]<\/p>\n","protected":false},"author":2,"featured_media":502998,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":{"0":"post-502985","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-top-news"},"yoast_head":"\n