Bank of Pakistan Holds at 11%
State Bank of Pakistan MPC Decision Summary
Key Facts from the Monetary Policy Statement (October 27, 2025)
The Monetary Policy Committee (MPC) of the State Bank of Pakistan released its latest statement on October 27, 2025, detailing its decision and the current economic outlook.
Monetary Policy Decision
Policy Rate: The MPC decided to keep the policy rate unchanged at 11 percent.
Rationale: The decision was viewed as appropriate to maintain ongoing price stability, given the still-unfolding impact of the earlier policy rate reduction. The real policy rate is seen as adequately positive to stabilize inflation within the medium-term target range of 5-7 percent3.
Economic Indicators and Outlook
Inflation
September Headline Inflation: Rose significantly to 5.6 percent (from 3.0 percent in August).
Core Inflation: Remained unchanged at 7.3 percent.
Outlook: Inflation is expected to exceed the upper bound of the target range for a few months in H2-FY26, before reverting to the target range in FY27.
Growth (Real Sector)
FY25 GDP Growth: Revised to 3 percent (from 2.7 percent).
Industrial Growth: Large-Scale Manufacturing (LSM) expanded by 4.4 percent during July-August FY26.
FY26 GDP Growth Outlook: Real GDP growth is now assessed to be in the upper half of the earlier projected range of 3.25 percent to 4.25 percent.
External Sector
Q1-FY26 Current Account Deficit: Contained at $594 million.
September 2025 Current Account: Posted a surplus of $110 million.
FX Reserves: SBP’s Foreign Exchange (FX) reserves increased to $14.5 billion as of October 17.
FX Reserve Projection: Projected to improve to $15.5 billion by December 2025 and around $17.8 billion by June 2026.
FY26 Current Account Deficit Outlook: Expected to remain within the projected range of 0 to 1 percent of GDP.
Fiscal Sector
Q1-FY26 Tax Collection: Recorded a notable growth of 12.5 percent year-over-year.
Q1-FY26 Balances: Both the overall fiscal and primary balances are likely to post surpluses.
Key Developments
The impact of the recent floods on the broader economy appears to be somewhat lower than anticipated, with crop losses likely to be contained and supply disruptions minimal.
Pakistan reached a staff level agreement with the IMF on the EFF and the RSF reviews.
Inflation expectations of both consumers and businesses eased in the latest SBP-IBA sentiment surveys.
Private Sector Credit (PSC) growth rose to 17 percent.