The State Bank of Pakistan (SBP) will announce its new monetary policy on May 5, 2025. Analysts expect the central bank to cut the key policy rate by 50 basis points, bringing it down to 11.5%. The expected move comes as inflation continues to decline and interest rate cushions remain strong. Headline inflation dropped to just 0.7% in March, the lowest in around 60 years. It is expected to fall further to 0.45% in April. Meanwhile, average inflation for the fiscal year stands at 4.88%, much lower than last year’s 26.22%. These improvements have created space for the SBP to ease its policy stance. However, core inflation remains higher, with non-food and non-energy inflation projected at 7.72% in April. Moreover, the effect of last year’s high prices may fade soon, which could increase inflation slightly again. Still, analysts believe current data supports a moderate rate cut. Pakistan’s external position has also improved. The country posted a $1.2 billion current account surplus in March and $1.86 billion for the fiscal year so far. Remittances have risen, but imports are also climbing, showing early signs of rising domestic demand. These trends suggest that monetary policy may shift cautiously in the coming months.