State Bank of Pakistan’s Monetary Policy Committee to Decide on Policy Rate

The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) is convening today (Wednesday) to decide on the policy rate, with numerous market participants anticipating a rate reduction.

During its prior assembly held on June 16, 2025, the MPC opted to keep the policy rate steady at 11%, pointing to projected increases in inflation over the approaching months.

However, financial analysts now project that the central bank will lower the policy rate by a minimum of 50 basis points (bps) during today’s session.

“We foresee the central bank declaring a 50bps decrease during the upcoming MPC meeting,” Topline Securities stated in a recent analysis.

The brokerage firm suggested that the SBP possessed additional capacity for approximately a 100bps cut, given their forecast that inflation in FY26 would average between 5-7%, leading to a real rate of 400-600bps.

Analysts from Arif Habib Limited (AHL) similarly anticipate that the MPC will curtail the policy rate to 10.5%.

“Considering the diminished inflation, the manageable external position, and declining yields, circumstances appear conducive for further monetary easing, although certain potential risks exist,” AHL noted.

Correspondingly, a survey conducted by Reuters indicates that the SBP is prepared to reduce its benchmark interest rate by 50bps to 10.5%, with a broad expectation for continued easing as inflation moderates and external balances strengthen.

Ahmed Mobeen, a Senior Economist at S&P Global Market Intelligence, commented that the SBP is expected to further decrease rates but might proceed at a more “measured” tempo throughout the latter part of the year due to heightened import demand and worldwide commodity risks.

Previous MPC Meeting

During its June meeting, the MPC resolved to maintain the policy rate at 11%, aligning with market forecasts.

The committee at that juncture recognized that the rise in inflation during May, reaching 3.5% year-on-year (y/y), corresponded with their projections, while core inflation experienced a slight reduction.

“Looking ahead, inflation is anticipated to gradually rise and then stabilise within the targeted range during FY26,” the committee articulated.

The MPC also concluded that economic expansion was progressively gaining pace and was projected to strengthen further in the coming year, reinforced by the ongoing effects of earlier policy rate adjustments.

Since the previous MPC meeting, several notable economic shifts have taken place.

The rupee has seen an increase of 0.04%, whereas petrol prices have gone up by 5.3%.

On the global stage, oil prices have receded by almost 4% since the last MPC assembly, currently fluctuating around $69 per barrel.

Pakistan’s headline inflation was reported at 3.2% on a year-on-year (YoY) basis in June 2025, a lower figure compared to the 3.5% recorded in May 2025, as revealed by data from the Pakistan Bureau of Statistics (PBS).

Moreover, Pakistan’s current account (C/A) demonstrated a substantial surplus of $2.1 billion throughout the fiscal year (FY) 2024-25, marking a significant turnaround from the $2.07 billion deficit registered in FY24, as indicated by SBP data.

Foreign exchange reserves held by the SBP diminished by $69 million on a weekly basis, registering at $14.46 billion as of July 18.

The total liquid foreign reserves held by the country amounted to $19.92 billion. Net foreign reserves held by commercial banks were valued at $5.46 billion.