SBP expected to announce seventh consecutive rate cut as inflation eases

KARACHI: Pakistan’s central bank is expected to lower its key interest rate by up to 50 basis points (bps) in its upcoming meeting, marking the seventh consecutive rate cut as inflation continues to decline, according to analysts.

Since June 2024, the State Bank of Pakistan (SBP) has cut rates by a total of 1,000bps, from a high of 22 per cent, to help stabilise the economy. The most recent cut, which occurred during the Monetary Policy Committee’s (MPC) January meeting, reduced the key policy rate by 100bps to 12 per cent. This marked the sixth consecutive rate cut.

A recent poll by Business Recorder, surveying analysts, indicated a median expectation of a 50bps rate cut in the upcoming meeting, although one analyst predicted no change.

Waqas Ghani, Head of Research at JS Global, suggested that the central bank has room for further cuts, though he believes a 50bps reduction is most likely at the next meeting. Ghani linked this prediction to the country’s declining inflation.

Data released by the Pakistan Bureau of Statistics (PBS) on Monday showed that inflation in February 2025 had dropped to 1.5 per cent year-on-year, down from 2.4 per cent in January. This marks the lowest inflation reading since September 2015.

The SBP had projected in January that inflation would continue to fall in the short term but may rise later in the year. Ghani expects inflation to remain low until May but forecasts an uptick after that, potentially reaching between 6-8 per cent by the end of 2025.

Saad Hanif, Head of Research at Ismail Iqbal Securities, echoed this view, suggesting that inflation will stay in single digits for the next few months before rising due to base effects. He also anticipates that the central bank will lower the policy rate by up to 50bps in the upcoming MPC meeting.

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