SBP Likely to Keep Policy Rate Unchanged at 11% in September 2025
The State Bank of Pakistan (SBP) is widely expected to maintain the policy rate at 11% in its upcoming Monetary Policy Committee (MPC) meeting on September 15, 2025, according to a survey conducted by Arif Habib Limited (AHL).
The survey results show a strong market consensus for no change, reflecting the central bank’s cautious stance amid easing inflation but rising risks from flood-induced supply disruptions.
Market Expectations for SBP Monetary Policy
According to AHL’s survey:
- 92.3% respondents expect no change in the policy rate.
- 7.7% anticipate a 50bps cut in interest rates.
- Headline inflation cooled to 3.0% in August 2025 from 4.1% in July.
- Core inflation remains sticky at 7.3%.
Key Economic Indicators September 2025
| Indicator | Latest Data (2025) | Notes |
|---|---|---|
| Policy Rate | 11% | Likely unchanged |
| Headline Inflation (Aug) | 3.0% | Down from 4.1% in July |
| Core Inflation | 7.3% | Stable |
| FY26 Avg. Inflation Forecast | >7% | Above SBP’s 5-7% target |
| Current Account Deficit (July) | $254m | Down from $348m YoY |
| PKR Performance (FYTD) | +0.7% | 23rd consecutive gain |
| S&P Credit Rating | B- (Stable) | Recently upgraded |
| Large-Scale Manufacturing (June) | +4.1% YoY | Slight MoM contraction |
| FY25 LSM Output | -0.7% | Annual contraction |
| T-Bill Yields | +15bps | Short-term rise |
| 10-Year PIB Yield | -16bps | Slight decline |
Inflation & Supply-Side Pressures
- Despite easing inflation in August, flood-driven supply shortages are creating upward risks.
- Food prices surged, with double-digit MoM increases in essentials like wheat, onions, and tomatoes.
- FY26 inflation is expected to remain above the SBP’s 5:7% medium-term target.
External Sector and Growth Outlook
- Current account deficit narrowed to $254 million in July 2025, down from $348m last year.
- The Pakistani Rupee gained for the 23rd consecutive session.
- Imports of cotton and agriculture products may rise to offset flood-related damages.
- Large-scale manufacturing (LSM) grew by 4.1% YoY in June, though it contracted slightly MoM.
- FY25 closed with a 0.7% annual decline in LSM output, but recovery is expected with post-flood rehabilitation.
Important Highlights
- SBP expected to keep policy rate at 11%.
- Inflation eased to 3.0% in August, but risks remain due to food shortages.
- Current account deficit narrowed; rupee appreciated 0.7% FYTD.
- S&P upgraded Pakistan’s credit rating to B- (Stable).
- LSM posted growth in June, signaling gradual industrial recovery.
- Bond market stable with minor yield movements.
FAQs on SBP Monetary Policy September 2025
1. What is the expected policy rate in the September 2025 MPC meeting?
The SBP is likely to keep the policy rate unchanged at 11%, according to market consensus.
2. Why is SBP maintaining a cautious stance?
Because of inflationary risks from flood-driven supply disruptions, fiscal pressures, and external vulnerabilities.
3. How has inflation trended recently?
Headline inflation dropped to 3.0% in August, but core inflation remains steady at 7.3%.
4. What about the external account situation?
Pakistan’s current account deficit narrowed to $254m in July, while the rupee gained and S&P upgraded Pakistan’s credit rating.
5. Will industrial growth pick up?
Yes. Despite a 0.7% contraction in FY25 LSM output, analysts expect recovery as post-flood rehabilitation and stable macro indicators support growth.
