The State Bank of Pakistan (SBP) recently paused its series of interest rate cuts, maintaining the key policy rate at 12%. This decision comes after a cumulative reduction of 1,000 basis points from a peak of 22% in June 2024, aimed at stimulating economic growth.

Reasons for the Pause:

  • Inflation Trends: Inflation has significantly decreased, reaching a near-decade low of 1.5% in February 2025.
  • External Pressures: Concerns over currency stability and a widening trade deficit influenced the SBP’s decision to hold rates steady.

Economic Outlook:

  • Growth Projections: The SBP forecasts GDP growth between 2.5% and 3.5% for the current fiscal year, indicating moderate economic expansion.
  • Future Rate Cuts: Economists anticipate that the SBP may resume rate cuts later this fiscal year or early next year, contingent upon achieving medium-term inflation targets and stabilizing external accounts.