SBP set to keep policy rate on hold as economic, geopolitical uncertainty, inflation concerns mount
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The State Bank of Pakistan's (SBP) old building in Karachi. — AFP/File
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KARACHI: It is expected that Pakistan’s central bank will not change its key interest rate on Monday between 12 % on Monday between economic and geographical political uncertainty, analysts have reduced the chances of a change until the budget is announced by the fiscal year 26 and inflation is clear.
A survey of most analysts and major brokerage firms has predicted that the SBP will maintain the policy rate, while some have predicted a reduction of 50 twenty points (BPS). According to some estimates, 100bps rates will decrease.
If the majority is correct, it will mark the Central Bank’s second consecutive rate of hold, as it began to relax the monetary in June 2024. Since then, the rates have decreased by 1,000bps. During the final monetary policy meeting in March, the SBP did not change the rate of 12 %, citing the risks of rising prices due to high prices.
The SBP’s Monetary Policy Committee (MPC) has the capacity to further reduce the lower rates, as inflation decreases by 0.3 % in April, which is less than 0.7 percent in the previous month. However, after the next budget, global trade barriers, geographical political tensions, and inflation pressures about Pakistan’s economy can force the SBP to move forward cautiously. Analysts have warned that US President Donald Trump’s prices could do more harm than expected. Possible recession and inflation shock can have a negative impact on remittances, which is an essential support for Pakistan’s external current account.
Saad Hanif, the head of the research in Ismail Iqbal Securities, said that during his last meeting, the MPC highlighted the risks of high basic inflation and the potential increase in food and energy prices. The IMF has also emphasized the need for permanent monetary discipline, and indicated that the full effects of deduction in the previous rate have not yet been felt.
“After approaching the federal budget in June, policy makers are likely to closely monitor the results of its potential inflation,” said Hanif. Against this background, we expect the MPC to maintain policy rate at the next meeting. “
The SBP will probably adopt a view and viewing approach before the International Monetary Fund’s $ 7 billion bailout loan program review on May 9, when it decides whether $ 1 billion is to be released to Pakistan. In addition, a global lender will discuss a new 3 1.3 billion climate flexible debt.
The tracemark survey shows that 68 % of traders are expected to change any kind of monetary policy.
“Markets have been shaken by trade risks, capital emissions, and a central bank that is rightly cautious. More than $ 225 million has been quietly out of bonds and equity (April 2025). A cut door can be expanded.
“He said, the story of development has been buried.
Sana Taufiq, the head of the research at Arif Habib Limited, is expected to cut interest rates by 50bps, which has been reduced by 11.5 %. This expectation is driven by a trend of disinfection and historically high real interest rate 11.3 %.
“We believe a measuring and careful rate will help reduce economic restoration without reducing economic stability, especially to improve it, but still weaken, looking at the position of the external account,” Taufiq said.
“Although Pakistan has published an additional amount of a $ 1.86 billion current account in 9MFY25, the recent increase in imports and geographical political uncertainty in the region could endanger inflation and exchange rates. This progress can encourage SBP to encourage it.
