Pakistan Holds Key Rate as Floods, Tariffs Add to Risks
Pakistan’s central bank kept its key rate unchanged for a third straight policy meeting, signaling caution as flash floods and US President Donald Trump’s tariffs add to risks.
The State Bank of Pakistan kept the target rate at 11%, according to a notice on its website on Monday. Majority of the 38 analysts surveyed by Bloomberg had predicted the decision, with six forecasting a cut.
The decision comes as torrential monsoon rains killed more than 900 people, displaced 4.2 million, and destroyed vast farmland in Pakistan. While the government so far sees limited impact of floods on inflation, the weekly price gain index has accelerated more than 5% in the past two weeks —the highest in about nine months — forcing analysts to revise their inflation forecast for the year higher.
Arif Habib Ltd. forecasts inflation averaging 7.2% for the year started July, higher than central bank’s range of 5%-7%.
US tariffs and broader supply chain disruptions also risks straining Pakistan’s growth prospects. The US is Pakistan’s largest export market and its goods to Washington will face a 19% levy.
Pakistan is grappling with a dollar shortage at currency exchanges, heightening fears of hoarding and posing a threat to the rupee’s recent gains. A team from the International Monetary Fund will visit later this month to review its $7 billion loan program.
