SBP to decide policy rate today; geopolitical tensions, inflation risks could stall further cuts 

ISLAMABAD: The State Bank of Pakistan’s Monetary Policy Committee is set to meet Monday for its final review of the fiscal year, with most analysts expecting the central bank to keep the key interest rate unchanged at 11 per cent.

The decision would follow a surprise 100 basis-point cut in May, which brought the benchmark rate to its lowest level since March 2022. Since June 2023, the central bank has slashed the policy rate by a cumulative 1,100 basis points from a record high of 22 per cent, as inflation has cooled and external pressures eased.  

Despite improving domestic indicators, including a sharp decline in inflation and stability in the current account, experts say the central bank is likely to pause further easing for now.  

“While macro fundamentals are moving in the right direction, the central bank may prefer to stay cautious due to heightened global uncertainty and pending fiscal measures,” said Arif Habib Limited in a note to clients.  

The brokerage noted that although conditions favour a continuation of monetary easing, geopolitical tensions and potential commodity price shocks pose risks to the inflation outlook.  

A Reuters survey of economists echoed that view, with the majority forecasting no change in the benchmark rate. “There is still an upside risk to global commodity prices, which could trigger a resurgence in inflation,” said Ahmad Mobeen, senior economist at S&P Global Market Intelligence.  

Analysts say the central bank may opt to wait for clarity on the upcoming federal budget’s impact and global financial trends before considering another rate move. 

Read next: Safe-haven demand lifts gold prices near two-month high