Karachi, March 9, 2025 – The State Bank of Pakistan (SBP) is set to unveil its latest monetary policy statement on Monday, March 10, 2025. The central bank’s Monetary Policy Committee (MPC) will deliberate on potential adjustments to the benchmark policy rate amid an economic landscape marked by decade-low inflation.
The SBP has been in an easing cycle since June 2024, implementing a cumulative 1,000 basis points (bps) reduction over the past six months. This series of cuts brought the policy rate down from a record-high 22% in June 2024 to the current 12%, with the latest 100 bps reduction in January 2025.
Ahead of the MPC meeting, market sentiment remains divided regarding the central bank’s next move. A poll conducted by Topline Securities reveals that 38% of participants expect the policy rate to remain unchanged, while 62% anticipate a further rate cut of at least 50 bps. Among those predicting a cut, 37% foresee a 100 bps reduction, 20% expect a 50 bps cut, and 5% project a more aggressive 150 bps slash.
Financial analysts at Topline Securities believe the SBP has room for an additional 100 bps reduction, given expectations that FY26 inflation will average between 8-9%. With the current 12% policy rate, this scenario would yield a real interest rate of 300-400 bps, compared to the historical trend of maintaining real rates between 200-300 bps.
However, some factors may prompt the MPC to maintain the status quo in the upcoming meeting. Analysts highlight the International Monetary Fund (IMF) review scheduled for early March, which is expected to focus on new revenue targets and taxation measures that could impact the FY26 inflation outlook.
Additionally, higher import volumes over the past two months, averaging $5.2 billion in December 2024 and January 2025, coupled with the Pakistani Rupee’s 1.6% depreciation in the kerb market since November 2024, may encourage the SBP to pause further rate cuts to assess the full impact of previous reductions.
Furthermore, the Real Effective Exchange Rate (REER) reached 104.05 in January 2025, signaling a relatively overvalued PKR compared to regional peers, which could influence the central bank’s policy stance.
As the SBP prepares to announce its decision, financial markets and economic stakeholders remain keenly observant, awaiting signals on the future trajectory of monetary policy.
