- Some expect a reduction of 50 basic points (BPS) in the policy rate.
- Analysts warn against potential recession, inflation due to prices.
- The Tresmark survey shows that 68% of traders do not expect any change in policy.
Karachi: in the light of economic and geopolitical uncertainty, associated with inflation problems, should maintain its key interest unchanged at 12%, analysts minimizing the chances of a change until the budget of the next exercise (FY26) is announced and that the risks of inflation become clearer, The news reported on Sunday.
Most analysts and surveys of large brokerage companies predicted that the SBP on Monday would keep the pending policy rate, while some provided for a reduction of 50 basic points (BPS). However, few believe that rates would be reduced by 100 SBPS.
If the majority was correct, this would mark the second hint of consecutive rate of the central bank since it started a monetary relaxation cycle in June 2024. Since then, the rates have been reduced by 1,000 BPS. The SBP maintained the 12% unchanged prices at the last monetary policy meeting in March, citing the risks of prices due to higher American rates.
The SBP Monetary Policy Committee (MPC) has even more rate, because inflation went 0.3% in April, against 0.7% in the previous month. However, the concerns about the Pakistan economy resulting from disturbances in world trade, geopolitical tensions and inflation pressures after the upcoming budget can force the SBP to proceed carefully at that time.
Analysts warned that the pricing actions of US President Donald Trump could cause more trouble than expected. Potential recessions and inflation shocks may have a negative impact on funding, essential support for the external current account of Pakistan.
Saad Hanif, research manager at Ismail Iqbal Securities, said the MPC has highlighted the continuous risks of inflation higher to the heart and potential increases in food and energy prices at its last meeting. The IMF also underlined the need for a sustained monetary discipline, stressing that the complete effects of the previous rate reductions have not yet been felt.
“With the federal budget approaching in June, political decision -makers are likely to closely monitor its potential inflationary consequences. In this context, we expect the MPC to maintain the policy rate at the next meeting,” said Hanif.
The SBP is likely to adopt a waiting approach before examining the rescue program of $ 7 billion in the IMF on May 9, when it decides to disclose the $ 1 billion tranche in Pakistan. In addition, the world lender will discuss a new climate resilience of $ 1.3 billion.
A Tresmark survey shows that 68% of traders do not expect any change in the next monetary policy.
“The markets are shaken by commercial risks, capital outings and a central bank which is rightly cautious. More than $ 225 million have been quietly out of bonds and shares (April 2025). A reduction could widen the exit door,” he said.
“That said, the history of growth is buried. Export to GDP continues to drop. The IED is soft. If there has never been a case for the monetary stimulus, it is now.
Perhaps the central bank may need to prioritize growth in relation to caution, “he added.
Sana Tawfiq, research manager at ARIF HABIB LIMITED, provides for a drop of 50 BPS in interest rates, bringing them to 11.5%. This wait is driven by a disinflation trend and a historically high real interest rate of 11.3%.
“We believe that a drop in measured and prudent rate would help support economic recovery without undermining macroeconomic stability, in particular given the improving external account position, but still vulnerable,” said Tawfiq.
“While Pakistan posted an excess current account of $ 1.86 billion in 9MFY25, a recent increase in geopolitical imports and uncertainties in the region could present risks to inflation and exchange rate.
