The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) will meet shortly for its third session of the year, with analysts divided over the likely outcome.
In its meeting on March 10, the MPC maintained the policy rate unchanged at 12%. Since June 2024, the interest rate has declined by 1,000 bps.
Market expectations
Market experts remain split over the central bank’s upcoming move.
Arif Habib Limited (AHL), a brokerage house, said the State Bank of Pakistan (SBP) was expected to cut the key policy rate by 50 basis points (bps) to take it to 11.5%.
AHL, in its report, stated that given the sustained disinflationary trend and ample real interest rate cushion, there was still room for a measured rate cut to support economic recovery without undermining macroeconomic stability.
On the other hand, analysts at Topline Securities believed that the central bank’s MPC would observe a status quo, citing several factors, including the International Monetary Fund (IMF) review and the US tariffs risk.
“The expected foreign inflows for 2HFY25 have not materialised yet and are expected to be received once the first review of the IMF is approved by the Board (before Jun 2025),” the report noted.
“Furthermore, the IMF has also mentioned in its press release of staff-level agreement that Pakistan remains committed to maintaining a sufficiently tight monetary policy to keep inflation low.
“The US tariff risks are still looming, and we expect the central bank to maintain the status quo till any clarity on this global development.”
Similarly, a Reuters poll found that the SBP is set to hold its key interest rate at 12% due to geopolitical tension and the inflation outlook.
For now, the bank will likely maintain a wait-and-see approach due to a fluid trade picture, persistent core inflation and an upcoming International Monetary Fund review, said S&P Global Market Intelligence senior economist Ahmad Mobeen.
Previous MPC meeting
At its last meeting, the MPC of the central bank maintained the policy rate unchanged at 12%, contrary to market expectations.
The committee back then noted that economic activity continues to gain traction, as reflected in the latest high-frequency economic indicators.
“Moreover, the MPC viewed that some pressures on the external account have emerged due to rising imports amidst weak financial inflows.
“On balance, the MPC assessed the current real interest rate to be adequately positive on the forward-looking basis to sustain the ongoing macroeconomic stability.”
Since the last MPC meeting, several key economic developments have occurred.
The rupee has depreciated by 0.4%, while petrol prices decreased by 1.2%.
Internationally, oil prices have declined since the last MPC, hovering around $61 per barrel amid improved supply.
Pakistan’s headline inflation clocked in at 0.3% on a year-on-year basis in April 2025, a reading below that of March 2025, when it stood at 0.7%, showed Pakistan Bureau of Statistics (PBS) data.
In addition, Pakistan’s current account (C/A) posted a significant surplus of $1.2 billion in March 2025, against a deficit of $97 million last month. On a year-on-year (YoY) basis, the C/A increased 230% against a surplus of $363 million recorded in the same month last year.
Foreign exchange reserves held by the SBP edged higher by $9 million on a weekly basis, clocking in at $10.21 billion as of April 25.
Total liquid foreign reserves held by the country stood at $15.25 billion. Net foreign reserves held by commercial banks stood at $5.04 billion.
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