Pakistan central bank likely to hold rate at 11% as IMF flags inflation risks - Reuters poll

A labourer carries oranges at a fruit market in Lahore on December 11, 2025. (AFP)
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Updated 12 December 2025
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Pakistan central bank likely to hold rate at 11% as IMF flags inflation risks - Reuters poll

  • Majority analysts see inflation hovering at 6%–8% in coming months before rising toward end of fiscal 2026 
  • Most respondents now believe State Bank will not begin easing until the closing months of FY26

KARACHI: Pakistan’s central bank is expected to retain interest rates at 11 percent on Monday, a Reuters poll showed, as analysts push back rate-cut forecasts to late 2026 after the IMF warned inflation risks persist and policy must stay “appropriately tight.”

All 12 analysts surveyed expect no cut in the policy meeting on Monday. A majority of them see inflation hovering at 6 percent–8 percent in the coming months before rising again toward the end of fiscal 2026 as base effects fade and food and transport prices stay volatile after flood-related supply disruptions.

Most respondents now believe the State Bank of Pakistan (SBP) will not begin easing until the closing months of FY26, which ends in June 2026, with some analysts pushing forecasts for the first cut into fiscal year 2027, beginning July 2026.

IMF WARNS AGAINST PREMATURE EASING

The IMF, in a second review released on Thursday, said monetary policy needs to remain “appropriately tight and data-dependent” to keep expectations anchored and noted that the SBP had maintained positive real interest rates on a forward-looking basis.

It said the tight stance had been pivotal in reducing inflation and should be maintained to ensure price stability and support the rebuilding of external buffers.

Analysts said these risks, along with the SBP’s preference for maintaining positive real interest rates, would keep policymakers cautious.

The SBP has held its policy rate at 11 percent since September, after cutting it by 1,100 basis points between June 2024 and May 2025 as inflation fell sharply from highs near 40 percent in 2023.

PRICE, EXTERNAL PRESSURES EDGE UP

Inflation has started to accelerate after months of decline, driven by food and transport costs and fading base effects. Headline inflation eased to 6.1 percent in November from 6.2 percent in October but remained above the SBP’s 5–7 percent target. The IMF expects inflation to temporarily accelerate to 8 percent–10 percent this fiscal year before stabilizing.

While Pakistan’s macroeconomic backdrop has stabilized somewhat, analysts said the recovery remains sensitive to external pressures.

Premature rate cuts could pressure the rupee even with anticipated IMF inflows, including $1.2 billion disbursement this week to bolster reserves and support climate-resilience reforms.

Any demand-driven uptick, said Sana Tawfik, head of research at Arif Habib Ltd, “will have an adverse impact on the external front.”


Tens of thousands flee northwest Pakistan over fears of military operation

Updated 28 January 2026
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Tens of thousands flee northwest Pakistan over fears of military operation

  • More than 70,000 people, mostly women and children, have fled remote Tirah region bordering Afghanistan 
  • Government says no military operation underway or planned in Tirah, a town in Khyber Pakhtunkhwa province

BARA, Pakistan: More than 70,000 people, mostly women and children, have fled a remote region in northwestern Pakistan bordering Afghanistan over uncertainty of a military operation against the Pakistani Taliban, residents and officials said Tuesday.

Pakistan’s Defense Minister Khawaja Mohammad Asif has denied the claim by residents and provincial authorities. He said no military operation was underway or planned in Tirah, a town in Khyber Pakhtunkhwa province.

Speaking at a news conference in Islamabad, he said harsh weather, rather than military action, was driving the migration. His comments came weeks after residents started fleeing Tirah over fears of a possible army operation.

The exodus began a month after mosque loudspeakers urged residents to leave Tirah by Jan. 23 to avoid potential fighting. Last August, Pakistan launched a military operation against Pakistani Taliban in the Bajau r district in the northwest, displacing hundreds of thousands of people.

Shafi Jan, a spokesman for the provincial government in Khyber Pakhtunkhwa, posted on X that he held the federal government responsible for the ordeal of the displaced people, saying authorities in Islamabad were retracting their earlier position about the military operation.

Khyber Pakhtunkhwa Chief Minister Suhail Afridi, whose party is led by imprisoned former Prime Minister Imran Khan, has criticized the military and said his government will not allow troops to launch a full-scale operation in Tirah.

The military says it will continue intelligence-based operations against Pakistani Taliban, who are known as Tehrik-e-Taliban Pakistan, or TTP. Though a separate group, it has been emboldened since the Afghan

Taliban returned to power in 2021. Authorities say many TTP leaders and fighters have found sanctuary in Afghanistan and that hundreds of them have crossed into Tirah, often using residents as human shields when militant hideouts are raided.

Caught in the middle are the residents of Tirah, who continued arriving in Bara.

So far, local authorities have registered roughly 10,000 families — about 70,000 people — from Tirah, which has a population of around 150,000, said Talha Rafiq Alam, a local government administrator overseeing the relief effort. He said the registration deadline, originally set for Jan. 23, has been extended to Feb. 5.

He said the displaced would be able to return once the law-and-order situation improves.

Among those arriving in Bara and nearby towns was 35-year-old Zar Badshah, who said he left with his wife and four children after the authorities ordered an evacuation. He said mortar shells had exploded in villages in recent weeks, killing a woman and wounding four children in his village. “Community elders told us to leave. They instructed us to evacuate to safer places,” he said.

At a government school in Bara, hundreds of displaced lined up outside registration centers, waiting to be enrolled to receive government assistance. Many complained the process was slow.

Narendra Singh, 27, said members of the minority Sikh community also fled Tirah after food shortages worsened, exacerbated by heavy snowfall and uncertain security.

“There was a severe shortage of food items in Tirah, and that forced us to leave,” he said.

Tirah gained national attention in September, after an explosion at a compound allegedly used to store bomb-making materials killed at least 24 people. Authorities said most of the dead were militants linked to the TTP, though local leaders disputed that account, saying civilians, including women and children, were among the dead.