Pakistan likely to keep interest rate unchanged: analysts

The Monetary Policy Committee (MPC) of Pakistan’s central bank is expected to keep the benchmark policy rate unchanged at 11% in its meeting on Monday, according to analysts.

The MPC is meeting at a time when the State Bank of Pakistan (SBP) is balancing rising inflation against signs of external stability, according to research reports by Al Habib Capital and Topline Securities.

Topline Securities’ latest market poll found that 85% of participants expect no change in the policy rate, compared with 72% in its previous survey. Meanwhile, about 15% foresee a rate cut, with 5% projecting a 25-basis-point reduction and 10% expecting a 50-basis-point cut.

Analysts attributed the preference for a “status quo” stance to persistent inflation pressures following recent floods that disrupted food supplies and damaged major crops.

Al Habib Capital noted that headline inflation rose to 5.6% in September, up from 3% in August. The weekly Sensitive Price Index increased by 5.03% year-on-year as of October 23.

The summer floods have particularly affected cotton and rice crops, with experts estimating around 10% damage to major cultivated areas — echoing patterns seen during the 2010-2011 floods.

Despite inflation risks, analysts pointed to improvements in the external sector. Pakistan recorded a current account surplus of $110 million in September, compared with a $325 million deficit in August, supported by stable foreign exchange reserves and a resilient rupee.

Large-Scale Manufacturing (LSM) grew 4.44% year-on-year in July-August FY26, with notable rebounds in automobile production (130.7%) and cement output (18.5%).

“The MPC is likely to adopt a ‘wait-and-see’ approach,” Al Habib Capital wrote, adding that the central bank will focus on anchoring inflation expectations while allowing time to assess the full economic impact of the floods and import trends.

Topline Securities maintained its interest rate forecast at 11% for FY26, expecting inflation to average between 6.5% and 7.5% for the fiscal year.

The firm projects the rupee to trade between Rs283–288 per US dollar by December and Rs292-297 by June 2026.

The brokerage also noted that 6-month KIBOR and T-bill yields have risen by 13-21 basis points since the last MPC meeting, suggesting that the market has scaled back expectations for a near-term rate cut.

“The SBP’s current 11% policy rate appears consistent with industrial expansion,” Al Habib Capital added. “It strikes a careful balance between curbing inflationary pressures and supporting the ongoing recovery in production sectors.”