October 27, 2025

Pakistan’s central bank has hit the pause button on its key interest rate, keeping it steady at 11% for the fourth straight time! This cool move comes as the recent floods turned out to be less cruel than feared, causing milder damage to crops and taming inflation pressure. The State Bank of Pakistan announced on its website that this decision is designed to keep prices stable, trusting the earlier rate cuts are now working their magic in the economy. And guess what? All 10 experts surveyed were on the same page, expecting the central bank to hold the rate firm. Since the last meeting, the economic outlook has got a fresh boost thanks to better-than-expected crop yields, a stronger industrial buzz, and a comeback in many fast-moving economic signals. The bank has even raised its growth forecast for the fiscal year 2026, predicting the GDP to rise towards the upper end of the 3.25% to 4.25% range, bringing smiles all around. Inflation worries? They are easing! The central bank expects inflation to hover above their target of 5-7% for a few months in the second half of the financial year but says it will fall back into that comfy range next year. The bank, however, remains watchful because of risk factors like unpredictable global commodity costs, potential rises in energy prices, and the uncertain prices of wheat and other perishable foods. Good news also comes with financial discipline advice. The bank believes Pakistan’s post-flood repair work can be handled with the current budget and stressed the need to stick to fiscal discipline. "Continued fiscal discipline is a must to meet balance targets and ensure long-term sustainability," the bank emphasized. Just a few months ago, in September, the bank feared floods could push inflation beyond that 5-7% sweet spot. Back then, inflation shot up to 5.6% from August’s 3.6% after floods hurt crops. Though border troubles with Afghanistan might weigh on next inflation figures, the overall tone is positive. Looking at foreign money matters, the central bank expects the current account deficit to stay within 0-1% of GDP in fiscal 2026. Thanks to official inflows, foreign exchange reserves are set to swell to $15.5 billion by December 2025 and about $17.8 billion by June 2026. Since June 2024, when rates hit a peak of 22%, the bank has slashed rates by a whopping 1,100 basis points but then held steady during its last four meetings with the most recent cut happening in May. So, the message is clear — steady as she goes for Pakistan’s economy as it recovers stronger and better.

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Tags: Pakistan central bank, Interest rate, Inflation, Economic growth, Foreign exchange reserves, Flood impact,