Karachi, December 15, 2025 – In an unexpected move, the State Bank of Pakistan (SBP) on Monday announced a 50 basis points cut in its benchmark policy rate, lowering it to 10.5% from 11%. The decision, effective December 16, 2025, came as a surprise to most market analysts who had widely anticipated the rate would remain unchanged.
The SBP’s Monetary Policy Committee (MPC) took this step amid improving economic indicators and moderate inflationary pressures. At its previous meeting on October 27, 2025, the MPC had kept the policy rate steady at 11%, citing minimal economic impact from recent floods and ongoing domestic recovery.
Financial analysts, including those at Arif Habib Limited (AHL), had expected the central bank to maintain the rate, noting that headline inflation’s prior low base was fading and the current account deficit had widened slightly. A Reuters poll also showed all 12 surveyed analysts had predicted no change, expecting rate easing only in late FY26 or FY27.
Recent economic data, however, may have influenced SBP’s surprise decision. Pakistan’s headline inflation stood at 6.1% year-on-year in November, while the rupee appreciated slightly by 0.2%. Oil prices declined over 6% internationally, hovering around $57 per barrel, and petrol prices remained largely unchanged domestically.
Meanwhile, Pakistan’s current account recorded a deficit of $112 million in October, while foreign exchange reserves held by the SBP increased to $14.58 billion. With commercial bank reserves at $5.03 billion, total liquid foreign reserves in the country reached $19.61 billion.
Market experts believe this unexpected rate cut could boost economic activity and investor confidence, while also signaling the central bank’s cautious support for growth amid global uncertainties.