Pakistan’s Central Bank Likely to Maintain Interest Rates Amid Economic Challenges

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Karachi: The State Bank of Pakistan (SBP) is anticipated to maintain its current interest rate at the upcoming Monetary Policy Committee (MPC) meeting, according to a recent survey conducted by Topline Securities. Scheduled for December 15, this meeting marks the final assessment of monetary policy for 2025.

The survey indicates that 70% of market participants expect the interest rate to remain unchanged, closely mirroring a previous poll where 72% anticipated no change. In contrast, 30% foresee a potential rate decrease, with varied expectations ranging from a 25 to 100 basis points cut.

Despite exploring the possibility of an interest rate increase, no respondents supported this option. Previous meeting minutes from September 15 revealed that only one of seven MPC members voted for a rate hike, and the minutes from the October 27 meeting have yet to be disclosed.

Analysts attribute the prevailing sentiment for maintaining status quo to several factors, including the impact of recent floods, projected inflation pressures in the latter half of fiscal year 2026, and a significant base effect. Rising non-oil import levels also contribute to the SBP’s cautious stance, as easing monetary policy could exacerbate these imports.

Secondary market indicators, such as the 6M KIBOR and 6M T-Bills, reflect stability since the last MPC meeting, with minimal changes in yields. The 6M T-Bill yield currently stands at 10.97%, while the 6M KIBOR is at 11.16%.

The poll also explored expectations for the fiscal year 2026, with 52% predicting the policy rate will remain at the current 11% by June 2026. Meanwhile, 33% anticipate a decrease to 10%, and 6% foresee an increase.

Inflation projections reveal that 70% of respondents expect rates to stay between 6-8%, while 24% predict it will drop below 6%. Topline Research and the International Monetary Fund both estimate inflation will average around 6.3% for the fiscal year.

Regarding currency exchange rates, 42% of participants forecast a range of Rs280-285 by June 2026, with 36% expecting a range of Rs285-290. Topline Research aligns with the latter, projecting the currency to fall within Rs285-290 by mid-2026.