KARACHI – State Bank is set to announce last monetary policy of the fiscal year 2024–25 today, and all eyes are on whether the central bank will continue with its easing stance or hit pause amid rising global risks.
Monetary Policy Committee (MPC) meeting today to decide policy rate after reviewing inflation data, external account conditions, and economic forecasts. In its last meeting on May 5, SBP surprised markets by slashing the interest rate by 100 basis points to 11 percent — the first major cut after months of tight monetary policy.
Market opinion remains divided ahead of today’s decision. More than half of participants expect central bank to maintain the current rate. Nearly 40 pcbelieve another cut is likely with only less than 20pc predicting 50bps cut and 25pc forecasting further 100bps reduction.
State Bank has room to ease further, as projected inflation for FY2025–26 is around 6–7%. This could allow real interest rates to remain well above historic norms. However, they caution that the central bank may hold steady due to rising international oil prices and upcoming energy price adjustments domestically.
In global market, Brent crude climbed to $70 per barrel amid geopolitical tensions in the Middle East. Higher oil prices have historically triggered inflation in Pakistan. Government notifications on gas and electricity prices are expected before the new fiscal year begins, which could fuel inflation in the coming months.
After last policy rate cut, money market yields plunged with 6-month KIBOR is currently at 11.09%, and 6-month T-bills are trading at 10.95%, indicating market anticipation of further easing.
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