KARACHI – State Bank of Pakistan is set to review policy rate on May 5, with Pakistanis expecting another cut amid drop in inflation and upcoming budget.
Sources familiar with development told Pakistan Observet that State Bank is likely to keep key policy rate same at 12percent on May 5 as the central bank takes cautious approach in response to rising geopolitical tensions and persistent inflationary pressures.
A recent poll of Karachi based brokerage house shows that policy rate is likely to remain same. Market sentiment shifted lately amid Pakistan-India tensios which heightened regional tensions, widening the yield spread between Pakistani and US debt.
The inflation of South Asian nation moved down to just 0.3pc YoY in April 2025, the lowest level on record. This decline was largely driven by a rebasing effect, with monthly inflation also falling by 0.8%. For the first 10 months of fiscal year 2025, the average inflation rate stood at 4.73%, a significant reduction from the 25.97% recorded during the same period last year.
This marks a continued downward trend from a peak of 38% in May 2023, reflecting ongoing improvements in price stability.
Although inflation showed notable improvement, the SBP remains cautious. The central bank forecasts average inflation for the fiscal year ending in June to range between 5.5% and 7.5%, while the Finance Ministry has pegged April inflation between 1.5% and 2%.
State Bank is expected to change monetary policy later in the year to stimulate growth and support credit demand. However, the timing remains uncertain as policymakers await clarity on global trade dynamics, domestic inflation trends, and the outcome of an upcoming International Monetary Fund (IMF) review.
IMF will assess Pakistan’s $7 billion bailout package on May 9, with a decision expected on the release of a $1 billion tranche. Talks will also cover a proposed $1.3 billion loan aimed at boosting climate resilience.
State Bank holds Policy Rate steady at 12pc amid economic revival
