Analysts Expect 50bps Rate Cut in Upcoming State Bank of Pakistan Meeting

Desk

The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) is set to meet for its second session of the year, with most analysts predicting a 50 basis points (bps) reduction in the key policy rate.

At the last MPC meeting on January 27, the SBP reduced the policy rate by 100bps to 12%, marking the sixth consecutive rate cut since June 2024 when the rate was 22%.

Market Expectations

Experts anticipate that the SBP will continue its easing monetary policy, driven by a decline in inflation. A recent Business Recorder poll of analysts revealed a median expectation of a 50bps cut, with only one analyst forecasting no change.

Waqas Ghani, Head of Research at JS Global, stated, “We believe the central bank has room for a 50-100bps cut in the near future. However, for this upcoming MPC meeting, a 50bps reduction is more likely.”

Saad Hanif, Head of Research at Ismail Iqbal Securities, also expects the central bank to adopt a cautious approach, predicting a potential 50bps cut in the upcoming meeting.

Arif Habib Limited (AHL), another leading brokerage house, anticipates a 50bps rate cut, which would bring the policy rate down to 11.5%. “Given the significant decline in inflation and stable reserves, a 50bps cut seems a reasonable decision in the next policy meeting,” AHL noted.

On the other hand, analysts at Topline Securities believe the SBP will maintain the current policy rate, citing factors such as the IMF review and the depreciation of the Pakistani rupee.

Previous MPC Meeting Highlights

In the January MPC meeting, the SBP cut the key interest rate by 100bps in line with market expectations. The MPC emphasized the need for a cautious monetary policy stance to ensure price stability and sustainable economic growth, with the real policy rate remaining sufficiently positive to stabilize inflation within the target range of 5-7%.

Key Economic Developments Since Last MPC Meeting

Several significant economic changes have occurred since the last MPC meeting:

The Pakistani rupee depreciated by 0.4%, while petrol prices fell by 0.2%.
Oil prices have decreased to around $70 per barrel, benefiting from improved supply conditions.
Pakistan’s headline inflation dropped to 1.5% year-on-year in February 2025, down from 2.4% in January 2025, according to Pakistan Bureau of Statistics (PBS) data.
Pakistan’s current account posted a deficit of $420 million in January 2025, marking a 4% increase compared to the $404 million deficit in January 2024. This was the first deficit after five consecutive months of surplus.
SBP’s foreign exchange reserves increased by $27 million, reaching $11.25 billion as of February 28, 2025. Total liquid foreign reserves held by the country stood at $15.87 billion, with commercial banks holding net reserves of $4.62 billion.

As the MPC prepares for its meeting, all eyes will be on how the central bank balances inflation control with the broader economic outlook.