Policy rate reduction of 50 basis points expected by SBP, according to brokerage house prediction, bringing the new rate to 11.5%
Hey there! Here's an updated breakdown of the upcoming May 5th, 2025 Monetary Policy Committee (MPC) meeting of the State Bank of Pakistan (SBP).
Expected Rate AdjustmentThe general consensus among analysts and market participants is pointing towards a 50bps decrease, potentially bringing the policy rate down to 11.5%. Breaking it down, a Topline Securities survey revealed that 69% of respondents expect a rate cut, with 37% favoring a 50bps adjustment, 30% anticipating a 100bps reduction, and a mere 2% predicting a 150bps cut. Only 31% foresee no change, dropping from 38% in the previous survey.
Inflation and Economic DriversThe improved inflation dynamics, mainly due to reduced food and energy prices and a more robust rupee, are significant factors in this scenario. Analysts forecast inflation to hover around 6–7% in FY26, resulting in real interest rates of 500–600bps. This is above the historical 200–300bps range, indicating an interesting shift in the economic landscape. The softening oil market has also eased import costs, contributing to the disinflation trend.
Future Rate-Cut TrajectoryIf inflation remains stable near the 6–7% mark, the SBP might reduce rates by up to 200bps throughout the remainder of 2025. However, the actual timing of these cuts depends on factors such as the resumption of the International Monetary Fund (IMF) program and post-budget fiscal clarity. While a May rate cut is not absolutely guaranteed, it remains highly likely, and further easing is expected in the latter half of 2025.
Hey there! Following the upcoming May 5th, 2025 Monetary Policy Committee (MPC) meeting of the State Bank of Pakistan (SBP), the potential for a 50bps decrease in the policy rate could undermined the recovery of inflation, currently predicted to hover around 6-7% in FY26. This might lead to real interest rates of 500-600bps, posing potential risks for businesses, finance, and investing. However, a rate cut might not be absolute, especially considering factors such as the resumption of the International Monetary Fund (IMF) program and post-budget fiscal clarity. If inflation remains stable, the SBP might consider reducing rates by up to 200bps throughout 2025, but the volatility of these decisions could also be influenced by the ongoing economic drivers and market volatility.
