ISLAMABAD: Pakistan’s central bank is widely expected to cut its key interest rate next week by 100 basis points (bps) after holding it at a record 22 percent for seven straight policy meetings, according to a Reuters poll of market watchers.
The central bank will meet on Monday, a week after Pakistan posted its lowest consumer price index (CPI) reading in 30 months at 11.8 percent in May — lower than most projections.
The decision will come days before Pakistan’s annual budget.
The median estimate in a Reuters poll of 16 analysts predicts the State Bank of Pakistan (SBP) will cut rates by 100 basis-points (bps).
Ten analysts are forecasting a 100 bps cut, one analyst expects a 150 bps cut, four expect a 200 bps cut. One respondent expected the bank to hold rates again.
Economic activity has been slow in Pakistan for the last two years as it implemented tough reforms under an International Monetary Fund (IMF) bailout in a bid to stabilize its crashing economy.
GDP growth was expected to be at 2 percent in the current financial year, which ends in June, and was negative in the previous year.
The government says it will target 3.5 percent this year as it expects an uptick in economic activity.
The government will formally approach the IMF for a new longer-term bailout this summer after completing a short term program earlier this year that helped it avoid a default.
The lender had previously stressed the importance of keeping a tight monetary policy to control inflation, which remained above 20 percent since May 2022 and hit a record high last year at 38 percent.
Inflation has since slowed, and came in at below 20 percent in April and 11.8 percent in May.
“Given the sustained decline in inflation and the fact that SBP showed prudence by not prematurely cutting rates, it now has the space to cut without risking things with the IMF,” said Uzair Yonus, an economic analyst.
However, Fawad Basir, Head of Research at KTrade, said tax reforms being considered in the budget may have a far-reaching impact on the economy and not just inflation.
“Once the impact of such decisions is evident in the high frequency data sets, followed by successful negotiation with the IMF, then the SBP will be in a good position to start the dovish stance possibly coinciding with US FED strategy.”
NAME/ ORGANIZATION EXPECTATION
1. AKD Securities -150 2. Al Habib Capital Markets -100 3. Ammar Habib -200 4. Arif Habib Limited -200 5. EFG Hermes -200 6. FRIM Ventures -100 7. Ismail Iqbal Securities -100 8. JS Capital -100 9. KTrade 0 10. Lakson Investment -100 11. Pak Kuwait Investment Company -200 12. Providus Capital -100 13. SCS Trade -100 14. Topline Securities -100 15. Uzair Younus -100 16. Vector Securities -100 Median -100
Poll shows Pakistan central bank expected to cut rates by 100 basis points
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Poll shows Pakistan central bank expected to cut rates by 100 basis points
- The State Bank of Pakistan has held interest rate at record 22 percent for seven straight policy meetings
- The bank is expected to hold the next meeting on Monday after inflation dropped to 11.8 percent in May
Pakistani stocks breach 176,000 points barrier as investors expect further rate cuts
- Pakistani financial analyst attributes surge to falling inflation, investors expecting further policy rate cuts
- Pakistan’s finance ministry said Thursday that inflation had slowed to 5.6 percent year-on-year in December
KARACHI: Pakistani stocks continued their bullish run on Thursday, breaching the 176,000 points barrier for the first time after trading ended, with analysts attributing the surge to investors expecting further cuts in the policy rate.
The KSE-100 benchmark gained 2,301.17 points at close of business on Thursday, marking an increase of 1.32 percent to settle at 176,355.49 points.
Pakistan’s central bank cut its key policy rate by 50 basis points to 10.5 percent last month, breaking a four-meeting hold in a move that surprised markets. Pakistan’s consumer price inflation slowed to 5.6 percent year-on-year in December, while prices fell on a monthly basis as per data from the finance ministry.
“Upbeat data for consumer price index (CPI) inflation at 5.6pc in December 2025 [with] investors expecting a further State Bank of Pakistan rate cuts on falling inflation data,” Ahsan Mehanti, CEO of Arif Habib Commodities Ltd., told Arab News.
The stock market witnessed a trading volume of 1,402.650 million shares, with a traded value of Rs48.424 billion ($173 million), compared with 957.239 million shares valued at Rs44.231 billion ($158 million) during the previous session.
Topline Securities, a leading brokerage firm in Pakistan, credited the surge to strong buying at the first session.
“This positivity can be accredited to buying by local institutions on the start of the new calendar year,” it said.
Pakistan’s Finance Adviser Khurram Schehzad highlighted that the bullish trend at the stock market reflected “strong investor confidence.”
“With lower inflation, affordable fuel, stronger reserves, rising digitization and a buoyant capital market, Pakistan’s economic outlook is clearly improving--supporting greater confidence, better investment sentiment and more positive momentum for 2026,” he said on social media platform X.
