SBP keeps policy rate at 11.5% as inflation climbs to 11.1%

The State Bank of Pakistan left its policy rate unchanged at 11.5% on Monday, with seven of the ten members of its Monetary Policy Committee voting to hold.

Headline inflation rose to 11.1% in August from 9.2% in July, while core inflation stood at 8.7%. The central bank said inflation expectations among consumers and businesses had also risen in September.

The committee said the escalating conflict in the Middle East had pushed global commodity prices higher and prolonged supply chain disruptions, adding to uncertainty about the outlook. It said recent price pressure came mainly from food, especially wheat and related products and perishables, along with high energy prices.

Foreign exchange reserves rose to $21.4 billion after Pakistan raised $3 billion through Eurobonds in September and the SBP bought foreign currency. The bank also noted Moody's upgrade of Pakistan's rating to B3 with a stable outlook, and said strong remittances and IT exports should keep the current account deficit within 0-1% of GDP in FY27.

The SBP kept its FY27 growth projection at 3.5-4.5%, citing better prospects for rice, sugarcane and cotton, and said petroleum sales, private-sector credit and textile exports pointed to a gradual pickup in July.

It expects inflation to ease towards the upper end of its 5-7% target range by June 2027, but warned that risks have grown from volatile commodity prices, possible electricity and gas tariff changes, supply disruptions and food prices.