KARACHI: The State Bank of Pakistan (SBP) is expected to keep its key policy rate unchanged at 11 per cent in its upcoming Monetary Policy Committee (MPC) meeting on October 27, as recent floods have triggered a fresh uptick in inflation, according to market surveys by leading brokerage houses.
Arif Habib Limited (AHL) said the central bank is likely to adopt a cautious stance amid rising inflation, a marginal widening of the current account deficit, and an early-stage domestic recovery.
“In light of flood-related price pressures, we expect the SBP to keep the policy rate unchanged at 11 per cent,” AHL said, noting that inflation climbed to 5.6 per cent in September from 3.0 per cent in August, largely due to food supply disruptions. The firm now projects average inflation for FY26 to exceed 7.0 per cent, slightly above the SBP’s 5-7 per cent target range.
Core inflation remained steady at 7.3 per cent, suggesting contained underlying pressures, but the overall outlook, AHL said, supports a cautious approach. “Stability itself may help nurture ongoing momentum in the real sector,” it added.
The bond market is also pricing in an unchanged policy stance, with yields stable across the curve. Large-scale manufacturing grew 9.0 per cent year-on-year in July, reflecting a gradual pickup in industrial activity, AHL noted.
Topline Securities added higher inflation stemming from floods and rising import levels limit room for monetary easing. “We expect the central bank to maintain status quo on the interest rate front through FY26,” it said, adding that inflation could rise to 8-9 per cent in the last quarter of FY26 before easing back to 6-7 per cent.
In a poll conducted by Topline, 85 per cent of participants forecast no change in the policy rate, up from 72 per cent in the previous survey. About 15 per cent expect a cut of 25 basis points (bps) or more.
SBP Governor Jameel Ahmad recently told Bloomberg that future rate decisions will depend on the economic fallout from the floods. In its last meeting, the MPC held the policy rate at 11 per cent, citing near-term macroeconomic risks stemming from the disaster.
