KARACHI: The debate over the upcoming monetary policy has intensified ahead of its announcement on Monday, with most analysts and researchers expecting the State Bank of Pakistan (SBP) to keep the policy rate unchanged.

Bankers and market experts cite two major reasons for maintaining the status quo — the recent floods in Khyber Pakhtunkhwa and Punjab that damaged crops and infrastructure, and rising inflationary pressures.

Analysts rule out cut as food inflation spikes and credit demand remains subdued

The Sensitive Price Index (SPI) increased by 5 per cent week-on-week, ending Oct 23, mainly due to higher food prices. Analysts said the surge reflected the impact of flood-related disruptions and warned that it would feed into the Consumer Price Index (CPI) in the coming months.

Fears of higher inflation have discouraged the central bank from considering a rate cut despite weak growth and a wide gap between inflation and the real interest rate. The policy rate has remained unchanged at 11 per cent since May, even as trade and industry continue to press for a substantial reduction to support economic activity.

SBP data show that private-sector credit demand remains subdued, with businesses largely avoiding new borrowing even after the first quarter of the current fiscal year. Economic growth has remained sluggish over the past three years, deepening social and fiscal challenges. Nearly 97 million people are estimated to be living below the poverty line.

The government continues to struggle to revive growth and attract both domestic and foreign investment, particularly in manufacturing and agriculture. Industry leaders argue that high borrowing costs and an onerous tax regime have hurt competitiveness more than market pressures at home or abroad.

Market surveys conducted by research houses, including Topline Securities and Arif Habib Ltd (AHL), show that the majority of respondents expect no change in the policy rate in the upcoming review.

Published in Dawn, October 26th, 2025