Pakistan Keeps Policy Rate at 11% Amid Flood Concerns

The State Bank of Pakistan held its benchmark policy rate at 11% in September, marking the second consecutive decision to leave rates unchanged and in line with market expectations. Recent floods have devastated farmland in Punjab, disrupting supply chains, pushing up prices for wheat, rice, and vegetables, and prompting manufacturers to raise selling prices due to higher fuel and transportation costs and delays in input deliveries. Headline inflation eased to 3.0% in August, below the central bank’s 5-7% target range, but potential risks from rising food prices and crop losses from extreme weather could limit further easing of inflation pressures. On the GDP front, agricultural losses may weigh on growth, although reconstruction efforts could partially offset the impact. Given these uncertainties, policymakers are maintaining rates to balance inflation risks and economic stability.