KARACHI – The State Bank of Pakistan (SBP) is widely expected to cut its key interest rate by 50 basis points on Wednesday, according to a Reuters poll. All 14 economists surveyed agreed a rate cut was likely, with the majority predicting a 50 bps cut, bringing the rate down to 10.5%.
This expected move comes as inflation continues to cool. Consumer price inflation dropped to 3.2% in June, while average inflation for the previous fiscal year fell to just 4.49% – the lowest in nine years. Analysts believe these developments give the SBP room to ease monetary policy further.
However, experts also urge caution. Although external reserves have improved to over $14 billion, rising import demand and currency pressure remain concerns. Analysts warn that the central bank should remain data-driven and consider global risks before aggressive easing.
The SBP began cutting rates from a record high of 22% in June 2024. After several cuts totaling 10 percentage points, the bank paused in March, cut again in May, and held steady in June due to Middle East tensions. Despite this, officials say the current policy is already helping stabilize inflation and the external account.
SBP Governor Jameel Ahmad recently said the central bank will keep a tight stance to keep inflation within its 5–7% target. Still, economists expect more cuts in the months ahead, especially as Pakistan’s economic buffers strengthen and international reviews conclude positively.
Adding to optimism, S&P Global recently upgraded Pakistan’s credit rating from ‘CCC+’ to ‘B-’. The improved outlook was credited to lower inflation, tighter fiscal controls, and better reserve levels, all of which support further interest rate reductions by the SBP.