The State Bank of Pakistan (SBP) is scheduled to announce its new monetary policy today, with the central bank’s governor expected to reveal the updated interest rate in a press conference.
The announcement comes at a time when significant improvements in economic indicators, particularly the inflation rate, have sparked speculation over a possible reduction in the key policy rate.
In recent months, Pakistan has witnessed a notable decline in inflation, with the rate falling to its lowest level in nearly six decades. In April, inflation was recorded at just 3.0 percent—a figure that has raised hopes of a shift in the monetary stance.
This downward trend in inflation has also affected returns on government financial instruments such as national savings schemes and treasury bills, suggesting that the conditions may be ripe for an interest rate cut.
Currently, the benchmark interest rate stands at 11 percent. However, there is growing pressure on the SBP to bring this rate down. Finance Minister Muhammad Aurangzeb has voiced his support for lowering interest rates, arguing that sustained high rates could hinder economic activity by discouraging investment and slowing down business operations.
Similarly, the country’s business community—including industrialists and entrepreneurs—has urged the central bank to reduce the interest rate to single digits. They argue that Pakistan’s rates are disproportionately high compared to those of neighboring countries, which places local businesses at a disadvantage and discourages borrowing and expansion.
A recent economic survey revealed a divided outlook among analysts. While 56 percent of experts believe the SBP will lower the interest rate by 50 to 100 basis points, 37 percent expect the central bank to maintain the status quo.
Economists forecast inflation to average between 5 to 7 percent over the current fiscal year, although they note a possible slight increase to around 3 to 3.5 percent in July. This still leaves room for a moderate easing of monetary policy, especially if the SBP seeks to stimulate growth in a more stable inflationary environment.
The SBP’s decision, to be announced later today, is expected to shape the direction of Pakistan’s economy for the coming months. All eyes are now on the governor, whose announcement could provide crucial insights into the country’s macroeconomic strategy in the face of both domestic recovery and global economic uncertainty.
