Pakistan’s central bank is widely expected to maintain its policy rate at 11% in the upcoming monetary policy meeting, according to a Reuters survey, as analysts delay predictions of a rate cut to late fiscal 2026 or even FY27. All 12 analysts surveyed indicated no change in the policy rate on Monday, citing persistent inflationary risks and external pressures.
Inflation is expected to hover between 6% and 8% over the coming months, before potentially rising toward the end of FY26 as base effects diminish and prices for food and transport remain volatile following recent flood-related supply disruptions. Most respondents now anticipate that the State Bank of Pakistan (SBP) will begin easing rates only in the closing months of FY26, while some project the first cut to occur in fiscal year 2027, beginning July 2026.
The International Monetary Fund, in its second review released Thursday, emphasized that monetary policy should remain “appropriately tight and data-dependent” to anchor expectations. The IMF noted that the SBP’s maintenance of positive real interest rates has been crucial in reducing inflation and is key to supporting price stability and rebuilding external buffers. Analysts said this guidance, combined with the SBP’s cautious approach, will keep policymakers from easing rates prematurely.
The SBP has kept the policy rate at 11% since September, following a 1,100 basis point reduction between June 2024 and May 2025, after inflation declined from peaks near 40% in 2023. While headline inflation eased slightly to 6.1% in November from 6.2% in October, it remained above the SBP’s target range of 5%–7%. The IMF projects inflation could temporarily rise to 8%–10% this fiscal year before stabilizing.
Analysts also highlighted that Pakistan’s macroeconomic recovery remains vulnerable to external pressures. Premature rate cuts could strain the rupee even with expected IMF inflows, including a $1.2 billion disbursement this week aimed at strengthening reserves and supporting climate-resilience reforms. Sana Tawfik, head of research at Arif Habib Ltd, noted that any demand-driven increase in monetary activity could adversely impact external stability.
Given these dynamics, analysts expect the SBP to maintain its cautious stance, prioritizing both inflation control and the stabilization of external accounts, before considering any gradual rate reductions later in FY26 or FY27.
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