The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) is set to convene today for its second meeting of the year, with widespread expectations of a 50 basis points (bps) cut in the policy rate.

Market Expectations

The last MPC meeting on January 27 saw a 100bps reduction, bringing the policy rate to 12%, marking the sixth consecutive cut since June 2024, when it stood at 22%.

Analysts anticipate that the central bank will maintain its monetary easing approach due to declining inflation. A survey by Business Recorder indicated a median expectation of a 50bps cut, though one analyst predicted no change.

• Waqas Ghani, Head of Research at JS Global, believes the SBP has room for a 50-100bps reduction, but a 50bps cut is the most probable outcome.
• Saad Hanif, Head of Research at Ismail Iqbal Securities, suggests that the central bank will take a cautious stance and may cut the rate by up to 50bps.
• Arif Habib Limited (AHL) expects a 50bps cut, bringing the policy rate down to 11.5%, citing falling inflation and stable reserves as key reasons.
• In contrast, Topline Securities predicts no rate change, attributing it to concerns over IMF reviews and PKR depreciation.

Economic Indicators & Previous MPC Decision

In its last meeting, the MPC emphasized the need for a cautious approach to maintain price stability and ensure sustainable economic growth. Since then, notable economic shifts have taken place:

• The Pakistani rupee depreciated 0.4%.
• Petrol prices declined by 0.2%.
• Global oil prices fell, hovering near $70 per barrel due to improved supply conditions.
• Pakistan’s inflation dropped to 1.5% in February 2025, compared to 2.4% in January 2025 (Pakistan Bureau of Statistics).
• The current account posted a deficit of $420 million in January 2025, up 4% from the $404 million deficit in the same month last year.
• SBP’s foreign exchange reserves rose by $27 million, reaching $11.25 billion as of February 28, while the country’s total liquid reserves stood at $15.87 billion.

With these economic indicators in play, all eyes are on SBP’s policy decision today, which could influence financial markets, businesses, and inflation outlook.