KARACHI – State Bank of Pakistan (SBP) will review its monetary policy on July 30, with wide expectations of possible interest rate cut as inflation continues to cool down and economic growth remains under pressure.
All eyes are on central bank as treasury bills (T-bills) by up to 39 basis points in its latest auction. The move has strengthened market belief that the central bank may begin monetary easing after holding the policy rate steady at 11% since May.
Expectations further increased as consumer prices rose just 3.2% in June, and July inflation is expected to remain between 3% and 3.5%,a steep fall from 11.1% a year ago. The improved inflation outlook has increased speculation that the central bank will move to lower borrowing costs.
Pakistan’s economic growth remains modest, with GDP expanding only 2.6% in FY25. Economists warn that such a pace is insufficient to reduce poverty, which affects roughly 47% of the population. Many argue that monetary policy support is crucial, especially given the lack of growth-focused measures in the FY26 federal budget.
Recent survey shows 56% of market participants now expect a 50–100 basis point rate cut, up from 44% in the previous poll. Meanwhile, the share of those expecting no change has dropped to 37%.
The central bank is expected to cut rates gradually, starting with 50bps cut this month, as inflation for FY26 is expected to average between 5% and 7%. This would still leave the real interest rate significantly above the long-term average.
T-bill auction received strong response, with total bids reaching Rs1.058 trillion. The government raised Rs409 billion — more than twice its Rs200 billion target — to meet maturities worth Rs361 billion.
July 30 MPC review will be closely watched by investors, businesses, and policymakers as rate cut could ease borrowing costs, boost investment, and support growth across wide sectors.
