SBP Likely to Cut Policy Rate Next Week

The State Bank of Pakistan (SBP) is expected to cut its key policy rate by 50 basis points (bps) at its upcoming monetary policy meeting on Monday, according to a Reuters poll.

Seven out of 10 analysts expect SBP to reduce rates by 50bps. Two forecast a 75bps cut, while one expects rates to remain unchanged. The median forecast points to a 50bps reduction.

If implemented, the cut would lower the policy rate to 10.5 percent. Since mid-2024, SBP has cumulatively cut rates by 1,150bps.

Poll participants backed rate cut chances due to moderating inflation, higher foreign exchange reserves and an improved balance of payments outlook as key drivers.

Some analysts said conditions are aligning for a faster easing cycle. Others urged caution as risks could emerge from global tensions and potential volatility in fuel prices. The International Monetary Fund has also cautioned Pakistan against premature monetary easing under its $7 billion loan program.

The SBP has stated that inflation stayed within its 5–7 percent target range during July–November but warned that core inflation remains sticky and headline inflation could rise temporarily.