As Pakistan’s central bank gears up for its next monetary policy meeting scheduled for March 10, 2025, market opinions remain divided on whether interest rates will be reduced. Surveys conducted by various research houses indicate that while many market participants are anticipating a reduction, opinions differ on the extent of the cut, with some forecasting a modest decrease and others expecting a more substantial adjustment.
According to market sources, the State Bank of Pakistan (SBP) may lower interest rates by anywhere from 50 to 100 basis points, based on expected inflation figures for February 2025. Despite this expectation, opinions are split on the overall direction of the monetary policy. Research firms, including Topline Securities and Arif Habib Limited (AHL), have carried out surveys to gauge the market’s outlook on the potential interest rate move, considering the current inflation environment and other economic indicators.
In a poll conducted by Topline Securities, market participants expressed varied views about the forthcoming rate decision. Approximately 38% of respondents believe that the SBP will maintain the current rate, while 62% anticipate at least a 50 basis point cut. Among those expecting a rate reduction, 37% predict a more substantial 100 basis point cut, 20% expect a 50 basis point decrease, and 5% foresee a sharp 150 basis point reduction.
Topline’s analysis suggests that the SBP has room for a 100 basis point cut, with inflation expected to hover around 2-3% in February 2025. The report notes that the current policy rate of 12% is likely to result in a real rate of 300-400 basis points, which is deemed conducive for further easing. According to the survey, the majority of respondents expect inflation to average between 6% and 8% for FY25, which could justify further cuts in the future. However, Topline believes that the SBP’s Monetary Policy Committee is more likely to keep the policy rate unchanged in the upcoming meeting, despite the general expectation of a rate cut.
In a similar survey by Arif Habib Limited, a clear majority (74%) of participants favored a rate reduction, with only 26% believing that the rate will remain unchanged at 12%. A significant portion of respondents (36.8%) anticipates a 100 basis point cut, while 21.1% expect a 150 basis point reduction. A smaller group (10.5%) expects a more conservative 50 basis point cut.
AHL’s analysis highlights that the easing cycle is unlikely to be over yet, but with inflation sharply declining and reserves remaining stable, the scope for large reductions is becoming narrower. The report suggests that a 50 basis point cut seems to be the most probable outcome in the upcoming policy meeting.
Participants in AHL’s survey included professionals from various sectors, such as banks, asset management companies, insurance firms, and development finance institutions, alongside non-financial sectors like exploration, production, cement, fertilizers, steel, textiles, and pharmaceuticals. This broad range of responses offers a comprehensive view of the market’s sentiment toward potential interest rate movements.
Regarding the interest rate target for June 2025, the surveys show that 95% of respondents believe the rate will remain within the 10-12% range. This suggests that there could be further reductions of up to 200 basis points over the next few months, in line with expectations for continued easing.
Ultimately, while the majority of market participants are forecasting a rate cut, the uncertainty remains, as opinions differ on the extent of the reduction. The decision will largely depend on the SBP’s assessment of inflation trends, economic stability, and the external sector, as it strives to balance the need for growth with controlling inflation and maintaining financial stability. The outcome of the March 2025 monetary policy meeting will therefore be closely watched by financial markets, businesses, and consumers alike.