KARACHI: The State Bank of Pakistan (SBP) is expected to keep its key rate steady on Monday, a Reuters poll showed, as floods that ravaged farmland and threaten fresh food inflation prompt policymakers to extend their pause on monetary easing.
Thirteen of 14 analysts surveyed forecast the SBP will hold its policy rate at 11%, while one projected a 50 basis-point cut.
Since late June, floods have swamped Pakistani Punjab’s farmland, disrupting supply chains and stoking inflation fears, with nearly 950 people killed, 6,500 livestock lost, 8,200 houses destroyed and 4.5 million displaced as waters move south.
“Given the uncertainty, we expect the central bank may pause in September, though our base case allows for a 50–100 bps cut by year-end,” said Waqas Ghani, head of research at JS Global Capital.
Sana Tawfik, head of research at Arif Habib Limited, said agricultural losses could shave around 0.2% off gross domestic product growth, though reconstruction may provide some offset.
Analysts said flood-driven supply shocks, especially in wheat, rice and vegetables, could keep inflation above the central bank’s 5–7% target.
Saad Hanif of Ismail Iqbal Securities said food inflation could face “temporary shocks”, with wheat prices up about 50% in a month.
Inflation eased to 3% in August from 4.1% in July, but the finance ministry, which projected 4% to 5%, warned crop losses and extreme weather could soon push prices higher.
“Manufacturers have also raised selling prices, citing higher fuel and transport costs and delays in input deliveries caused by flooding,” said Ahmad Mobeen, senior economist at S&P Global Market Intelligence.
The SBP has cut rates by 1,100 basis points since June 2024, when they stood at a record 22% after inflation peaked near 40% in 2023. It last cut by 100 bps in May, after a March pause, and held steady in June amid oil price pressures from Middle East tensions.
Still, some see room for cuts.
“Real interest rates are still high enough to allow for a cut, especially with the Fed turning dovish, but the floods are inflationary, particularly for food,” said Ammar Habib, an independent analyst.
